You might have heard the term “asset disposal account”. What is it and should you have one for recording your assets? We gain some understanding here.
What Is An Asset Disposal Account And Should You Have One?
Asset disposal is the removal of assets from your accounting records or balance sheet. Asset disposal can be through selling, trading in an asset, or removing an asset from the business by any other means. The physical removal of the asset is not enough when following proper business practice, it also needs to be removed from the accounting records.
When an asset is sold, an asset disposal account is created. This is purely to record the transaction and the profit that was gained in selling the asset or the loss that was incurred. If your accounts are run by a reputable accountant or accounting team, you will have an asset disposal account set up if you are in a position to sell an asset. So, the answer to the question is: yes! If you are selling assets, then you need an asset disposal account.
What Information Is Used In An Asset Disposal Account?
An asset disposal account is created to maintain clean and updated accounting records for a business. If there was a profit or loss made on the sale of an asset, it will be recorded on the asset disposal account. Depending on the condition of the asset, the date sold and various other variables, some of the entries will include:
- The date of purchase
- The amount it was bought for on the date of purchase
- Accumulated depreciation
- Credit amount for purchase
- Gain on asset disposal
- Loss on asset disposal
We offer expert valuation services to help you ascertain the value of your assets.
If you are looking to sell any of your assets, please contact us and we can guide you through the process.