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General Accounting Discussions: Accumulated Depreciation- Disposal

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    My corporate office passed the following posted entry for disposing of an asset. The asset was depreciated for one month, and due to water damage it was disposed the following month.

    Loss (Gain) Sale of fixed asse DR
    Accum Depr. - Disposal DR
    PC (fixed Asset)-Disposal CR

    My question is that now I have a depit balance sitting in the Accum Depr. - Disposal, which looks kind of odd. Please note that the Accum Depr.- disposal is a different account number than the original accum depr. account. My question is this entry correct? Is it common to use a seperate account for disposing assets. I understand it could be for tracking purposes, however it makes the balance sheet look odd.??

    Any Idea?

    Thanks,
    • CommentAuthorabril
    • CommentTimeJul 12th 2007
     
    for disposal, use this entry

    first adjust your accumulated depreciation to its true amount (depreciation specifically for that asset)
    then you debit the cash or any consideration you get in selling the asset (dont use sales account)

    take a look on the carrying amount. is the cash you get is greater than the carrying value, then you have a gain on disposal

    if its lower, you have a lose on disposal

    if its a lose, entry would be

    dr.cash
    dr.acc.dep
    dr. lose on disposal
    cr.fixed asset

    for gain, entry would be

    dr.cash
    dr.acc. dep
    cr. gain on disposal
    cr. fixd asset

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