Normally, when disposing assets, the company\u2019s management should have the aim to sell it. This way you simply don\u2019t make a loss or get rid of an obsolete asset, but also earn something in the process. There is a really good chance that someone else may have use for it as it\u2019s not that old for them, suits their business strategies more or they want the spare parts of it. Whatever the reason, but the party selling the asset, gets the proceeds which obviously is good in essence. <\/p>\n
So, when the management has decided to sell the asset and in case there is a buyer, the asset is traded. It changes owners and as such the financial statements of the seller also change. It no longer possesses the asset and as such, it should also be derecognized from the financial statements.
\n
\nThe entries following the sale as follows:<\/p>\n
1. Derecognition<\/p>\n
Db Accumulated depreciation (related to asset)
\nDb Loss from writing down assets (difference between cost value and accumulated depreciation)
\nCr Property, plant and equipment class (the asset at its cost value)<\/p>\n
2. Sale transaction<\/p>\n
Db Receivable to buyer
\nCr Proceeds from transaction (money received from transaction)<\/p>\n
The asset related effects are as with disposal, it is written off from the balance sheet and the loss from the carrying value write off is recognized on the income statement. What also happens though is income recognition as part of non-operating income. In case the carrying value is less than the sales proceeds, company has made a net profit obviously. If the ratio is vice a versa, then there is net loss. <\/p>\n","protected":false},"excerpt":{"rendered":"
Normally, when disposing assets, the company\u2019s management should have the aim to sell it. This way you simply don\u2019t make a loss or get rid of an obsolete asset, but also earn something in the process. There is a really good chance that someone else may have use for it as it\u2019s not that old […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,33,56],"tags":[],"class_list":["post-2251","post","type-post","status-publish","format-standard","hentry","category-1-basic-accounting","category-1-5-property-plant-and-equipment","category-1-5-4-utilizing--selling-and-disposing-of-assets"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2251","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=2251"}],"version-history":[{"count":3,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2251\/revisions"}],"predecessor-version":[{"id":2598,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2251\/revisions\/2598"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=2251"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=2251"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=2251"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}