Gain or Loss on Disposal
Definition: Proceeds minus net book value
Scope:ModerateDifficulty:Easy
Proceeds minus net book value
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Sell at a gain | ||
| Cost $30,000, accum depr $22,000, sell for $12,000. | ||
| CashAsset+ | $12,000 | |
| Accumulated DepreciationContra Asset− | $22,000 | |
| EquipmentAsset− | $30,000 | |
| Gain on DisposalRevenue+ | $4,000 | |
| Book value $8,000; proceeds $12,000; gain $4,000. | ||
| 2. Sell at a loss | ||
| Cost $30,000, accum depr $18,000, sell for $8,000. | ||
| CashAsset+ | $8,000 | |
| Accumulated DepreciationContra Asset− | $18,000 | |
| Loss on DisposalExpense+ | $4,000 | |
| EquipmentAsset− | $30,000 | |
| Book value $12,000; proceeds $8,000; loss $4,000. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$12,000.00
$8,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$20,000.00
Accumulated DepreciationAccumulated DepreciationLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$22,000.00
$18,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
Normal bal. ▶
$40,000.00
EquipmentEquipmentAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$30,000.00
$30,000.00
$60,000.00
Gain on DisposalGain on DisposalRevenueIncome earned from business operations. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$4,000.00
Normal bal. ▶
$4,000.00
Loss on DisposalLoss on DisposalExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$4,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$4,000.00
DurationN/A
External Links
- Disposal of fixed assets — Wikipedia