A client has traded his existing car in for a new car - he received a discount on the new car for the existing one. I am not sure I have accounted for it correctly as I did seek advice from one of my associations, but now the trial balance does not work. I have done the following:
Dr Disposal for Amount in Prov for Dep'n
Cr Prof for Dep'n to make it a zero balance
Dr Motor Vehicles for amount they got in trade
Cr Disposal Account for amount they got in trade
Dr Disposal Account for original value of vehicle
Cr Motor Vehicles for original value of vehicle
I haven't touched the actual Depreciation Account - is that what I should have done? The association said to credit depreciation for the total amount the car has been depreciated that he's had it - yet the same association told me that depreciation is zeroed at the end of each year so the Prov of Dep'n account keeps the running total.
Any assistance would be most appreciated.
Arianna
Arianna Helm
Replies (1)
Please login or register to join the discussion.
A bit confused but here's what i would do
Treat the 1 transaction as 2 seperate things.
e.g.
Original car value £12,000
Depreciation £9,000 (therefore NBV £3,000)
New car £10,000
Trade in value on old car £2,000
Therfore paid £8,000
So, to account for new car in assets and bank: -
Dr Motor Vehicles (B/S) £10,000
Cr Bank £8,000
Cr Suspense £2,000
Now dispose of old car: -
Dr Depcn (B/S) £9,000
Cr Motor Vehicles (B/S) £12,000
Dr Suspense £2,000
Dr Loss on disposal (P+L) £1,000
The depcn in the P+L shouldn't be touched, i assume this is what your association was referring to with the zeroing.
I hope this helps.