Disposal of Non-Current Assets

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Question

What are the four steps in preparing a disposal account for a non-current asset?

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Answer

1. DR Disposal / CR Asset at Cost — transfer original cost 2. DR Provision for Depreciation / CR Disposal — transfer accumulated depreciation 3. DR Bank (or Trade Receivables) / CR Disposal — record sale proceeds 4. Balance the account: if DR > CR → **loss on disposal** (DR Income Statement); if CR > DR → **profit on disposal** (CR Income Statement)

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