Asset disposal journals

Asset disposal journals

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Current Sage codes

0030 - Office equipment

0031 - Office equipment depreciation

8004 - Depreciation

When posting normal depreciation journals, I do the following;

CR   0031   XXX

DR   8004   XXX

I need to dispose of some equipment which is showing under 0030, equipment has not been re-sold. How would I journal this? Also do I use the original asset purchase price or the value following the depreciation.

I assumed I would do the following;

CR   8004   XXX (original cost minus depreciation)

DR   0031   XXX (original cost minus depreciation)

Thank you! :)

Replies (8)

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By JoJo123
30th Jan 2014 12:18

??

 

Or do I complete the following...

CR   0031   £value of original cost minus depreciation

DR   8004   £value of original cost minus depreciation

Then...

CR   0030   £original cost

DR   8005   £original cost

 

*8005 is Disposal showing on P&L

 

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Stepurhan
By stepurhan
30th Jan 2014 12:27

New code

I don't have a copy of Sage to hand, so there may well be a code already, but the entries are as follows

CR 0030 - Original cost (remove the asset from your asset costs)

DR 0031 - Depreciation to date (also remove the depreciation associated with that item)

DR New P & L code - The balance

The last item is the loss on the disposal of the asset. Say you had an asset that had originally cost £1,000 and you had £500 depreciation to date. Essentially you had an asset that was worth £500 before, and afterwards you have nothing so this would be the "expense" of £500 from getting rid of it. 

If you had sold it, you would put the amount received to the same code. This would either reduce the "expense", because you got something back instead of losing the whole thing, or create income, because you had got more for it than your accounts showed it was worth.

 

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By johngroganjga
30th Jan 2014 12:21

You take the cost out of the cost account and the accumulated depreciation out of the accumulated depreciation account.  The difference between those two figures is the net book value of the asset(s) disposed of.  The difference between that figure and the disposal proceeds received is a profit or loss on sale, which goes to the profit and loss account. 

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By Richard Willis
30th Jan 2014 12:45

I assume

that Instant Accounts doesn't have asset management?  I have never used it but Sage 50 does it for you.

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By JoJo123
30th Jan 2014 14:04

Thank you all! :)
 

Thank you all! :)

 

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By KND Consultants
08th Feb 2014 20:05

New member found the above very informative thank you

I have just joined and was actually searching for something slightly different. But as a SAGE learner found the above very useful.

I am trying to locate a depreciation guide chart i.e computer depreciate at xx per year calculated at pro rata per month etc, Vehicles depreciate at x per year etc AAT currently teach full year depreciation from year of purchase but nothing in year of disposal I am led t believe this is not the case for real accounts. plus how do they arrive at the % depreciation I cannot find any guidelines from the HMRC

As part of my CPD I have agreed to do the books for my kayaking club which has managed to obtain quite a bit of funding for the purchase of kayaks and equipment. I am trying to find guidance on what is the acceptable rate of depreciation. It is purely a non profit making organisation, we do not claim any tax relief, I would just like to make sure the books are in order.

Any advice or guidance or a pointer in the right direction would be greatly appreciated.

 

kind regards

 

Kev D     

 

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Replying to accountantccole:
Stepurhan
By stepurhan
09th Feb 2014 08:15

Depreciation is variable

KND Consultants wrote:
I am trying to locate a depreciation guide chart i.e computer depreciate at xx per year calculated at pro rata per month etc, Vehicles depreciate at x per year etc AAT currently teach full year depreciation from year of purchase but nothing in year of disposal I am led t believe this is not the case for real accounts. plus how do they arrive at the % depreciation I cannot find any guidelines from the HMRC
You will find with real accounts that things are often not as black and white as you would expect. There are a number of areas where different treatment is justifiable, and you will get slightly different answers from different accountants. Depreciation is one of those areas, and none of the answers you might get is wrong per se.

The important thing to remember about depreciation is that it is just an estimate. When you make a provision for depreciation you are, to a certain extent, guessing how long an asset will last. You might aim to depreciate it over 5 years, and find it lasts for 10 or vice versa. As long as you had a good reason for your original estimate, it is not wrong, though you should revise it and amend future depreciation if it becomes apparent an asset has a longer or shorter life..

There are two main approaches to depreciation, straight line and reducing balance. Straight line is just charging a regular amount each year (e.g. 10% a year for an asset expected to last 10 years) Reducing balance is an amount that gets lower year on year by using the same percentage, but applying it to the value after depreciation to date each year instead of the cost (e.g. £10,000 asset at 10%. First year depreciation is £1,000. Second year depreciation is £900, being 10% of £10,000 less the £1,000 depreciation already charged). This is the method used for most items because it reflects how most items are valued for resale. A car that is second-hand in any way is much cheaper than a brand new car (high depreciation at the start). A car that is 10 years old is not valued much less than a car that is 9 years old (lower depreciation later on). This is also why charging a full year in year of purchase and nothing in year of disposal is often used. You expect higher depreciation at the time of purchase regardless. When you sell, the depreciation up to point of sale will be lower, and charging nothing offsets having charged a full year on purchase where an asset was only owned for, say, 9 months.

For the majority of assets 15% to 25% on a reducing basis are typical rates. For assets that become obsolete quickly, such as computers, 25% to 33% on a straight line basis is typical. Straight line for computers as improved technology makes them virtually worthless after a few years, whereas a car will still bed drivable.

As for monthly rates, you would normally just take the yearly calculations and divide by 12. For reducing balance you could do the reducing calculation each month (so the amount gets smaller from month to month) but that is likely to be a bit over-the-top for the accounts you are doing.

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By KND Consultants
14th Feb 2014 18:41

Greatly appreciated most comprehensive an helpful response I have received. I have no doubt I will be using this site again. Thank again for your help Kev D 

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