Atharv Sankliya (1359 Points)
06 March 2023
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 06 March 2023
Since it's lower of carrying amount or NRV, carrying amount cannot be credited. Those expenses can be included in selling expenses head. If it's NRV, selling price minus expenses to dispose.
Atharv Sankliya
(1359 Points)
Replied 06 March 2023
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 06 March 2023
Dr. Asset
Cr. Dismantling provision
When dismantling occurs
Dr. Dismantling provision
Cr. Asset
And assets and liabilities will reduce by the same amount. Then
Dr. Dismantling expense
Cr. Bank
And finally
Dr. Bank
Cr. Gain on sale
Cr. Asset
Or you can probably treat it in a different way as well. I forgot how to handle the provisions. Because in the above step, the carrying amount holds the liability which might not be the real transaction cost.
Will check examples and get back.
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 06 March 2023
Ok there is no big treatment for this
Dr asset Cr provision
and reverse the provision
Dr asset Cr provision
to calculate the carrying amount of the asset held for sale. This won't be necessary in your case because you ust recognised it and ready to sell it. Stop depreciation and sell it. What ever expenses related to it are expensed like mentioned previously.
Atharv Sankliya
(1359 Points)
Replied 09 March 2023
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 09 March 2023
The nature of Asset Disposal Account is Nominal- This account is opened at the time of sale of an asset and the profit/ loss on sale is transferred to the Profit and Loss a/c. Hence, it calculates the profit and loss on sale of assets. Thus, it is a Nominal Account.
So yes and it's a book and not final account. You can transfer it. By disposal expenses on the credit side of the ledger and To bank on the debit side of the ledger.
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 09 March 2023
If you create a disposal account, you have reconcile between three accounts like in the attached photo. That's reconciliation because all accounts involved in a transaction must have a dual aspect. There could be other simple methods but I'm not aware of it. Ok couldn't upload from mobile
Disposal account Dr balance (CR. Bank) CR. Balance (Dr. Disposal expenses)
Bank account Dr balance (CR expenses) CR balance (Dr. Disposal)
Expenses account Dr balance (Cr. Bank) CR balance (Dr. Disposal)
This happens during reconciliation because you added a expenses to disposal which involves two other accounts
CAclubindia
