I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

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6.6 Example: disposal of assets: ledger accounting entries 

A business includes $110,000 worth of machinery at cost in its accounts. Its policy is to depreciate 

plant and machinery at 20% per annum straight line. The total accumulated depreciation now stands at 

$70,000. The business sells for $19,000 a machine which it purchased exactly two years ago for 

$30,000. 

Show the relevant ledger entries. 

Solution 

PLANT AND MACHINERY ACCOUNT 

 

 $      

 

 $      

Balance b/d 

 110,000 

Plant and machinery disposals a/c 

 30,000 

 

              

Balance c/d 

   80,000 

 

 

110,000 

 

 110,000 

Balance b/d 

 80,000 

 

 

PLANT AND MACHINERY ACCUMULATED DEPRECIATION 

 

 $      

 

 $      

Plant and machinery disposals     

   (20% of $30,000 for 2 years) 

 12,000 

Balance b/d 

 70,000 

Balance c/d 

 58,000 

 

             

 

 70,000 

 

 70,000 

 

 

Balance b/d 

 58,000 

PLANT AND MACHINERY DISPOSALS 

 

 $      

 

 $      

Plant and machinery account 

 30,000 

Accumulated depreciation 

 12,000 

P/L a/c (profit on sale) 

   1,000 

Cash 

 19,000 

 

 31,000 

 

 31,000 

Check 

 

 $      

Asset at cost 

 30,000 

Accumulated depreciation at time of sale 

 12,000 

Carrying amount at time of sale 

 18,000 

Sale price 

 19,000 

Profit on sale 

   1,000 

6.7 Example continued: part exchange 

Exchange or part exchange of assets occurs frequently for items of property, plant and equipment. 

IAS 16 states that the cost of an item obtained through (part) exchange is the fair value of the asset