Asset Disposal / Write Off
Invoice Sales
Fixed Asset disposal or write off can occur when company wants to sale asset after few years of depreciation or in case of asset is scraped/broken.
Here we will see how we can use customer invoice and customer payment.
Why we do asset disposal/write off: This is essential since original cost and total accumulated depreciation should be removed from the accounting records.
Example
Company has fixed assets that originally cost of purchase 20,000 which have been depreciated by 12,000 to the date of disposal.
You may dispose asset in below conditions:
1. The fixed assets is scrapped and written off as having no value.
2. The fixed assets is sold for 6,000.
3. The fixed assets is sold for 10,000.
Net Book Value Formula
NBV = Purchase Cost - Accumulated Depreciation
In above example NBV will be 8000 (Using 20000-12000=8000).
Disposal of Fixed Assets = Profit and Loss account that would hold gain/loss/write off values.
Accumulated Depreciation = Depreciation account for given asset.
Fixed Assets = Asset account
Cash = Cash Account
Disposal of Fixed Assets Accounting Entry – For Write Off
Account Debit Credit
Fixed Assets 20000
Accumulated Depreciation 12000
Disposal of Fixed Assets 8000
If we sold asset in 10000 then we can experience gain of 2000 and we have to make accounting entry as below:
Disposal of Fixed Assets Accounting Entry – For Gain
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Account Debit Credit
Fixed Assets 20000
Disposal of Fixed Assets 20000
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Disposal of Fixed Assets 12000
Accumulated Depreciation 12000
If we sold asset in 6000 then we can experience loss of 2000 and we have to make accounting entry as below:
Disposal of Fixed Assets Accounting Entry – For Loss
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Account Debit Credit
Fixed Assets 20000
Disposal of Fixed Assets 20000
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Disposal of Fixed Assets 12000
Accumulated Depreciation 12000
Customer Invoice and Customer Payment - Gain Case
Disposal of Fixed Assets Accounting Entry –Customer Invoice - Gain Case
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Account Debit Credit
Customer Receivable 10000
Disposal of Fixed Assets 10000
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Customer Receivable 10000
Cash/Bank Account 10000
Customer Invoice and Customer Payment - Loss Case
Disposal of Fixed Assets Accounting Entry –Customer Invoice - Loss Case
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Account Debit Credit
Customer Receivable 6000
Disposal of Fixed Assets 6000
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Customer Receivable 6000
Cash/Bank Account 6000
