What is the disposal entry for a non-current asset as commonly recorded?

What is the disposal entry for a non-current asset as commonly recorded?

• A. Cr cost of NCA; Dr accumulated depreciation; Cr/Dr loss/profit on disposal
• B. Dr cost of NCA; Cr accumulated depreciation; Dr/Cr loss/profit on disposal
• C. Dr cash; Cr asset
• D. Dr asset; Cr cash

Answer: (A)

When a non-current asset is disposed of, you must remove both the asset’s cost and its accumulated depreciation from the books and then reflect any gain or loss on disposal. The disposal entry does this by: - crediting the asset’s cost to remove it from the records, - debiting the accumulated depreciation to clear the depreciation accumulated against that asset, - and using a loss or profit on disposal to balance the disposal difference (the net book value versus any proceeds). If there were cash proceeds, they would appear in a separate entry (for example, Dr Cash and Cr Asset), but the essential derecognition steps are to credit the cost, debit accumulated depreciation, and adjust with the gain or loss on disposal. This is why the described entry is the correct approach.

When a non-current asset is disposed of, you must remove both the asset’s cost and its accumulated depreciation from the books and then reflect any gain or loss on disposal.

The disposal entry does this by:

• crediting the asset’s cost to remove it from the records,

• debiting the accumulated depreciation to clear the depreciation accumulated against that asset,

• and using a loss or profit on disposal to balance the disposal difference (the net book value versus any proceeds).

If there were cash proceeds, they would appear in a separate entry (for example, Dr Cash and Cr Asset), but the essential derecognition steps are to credit the cost, debit accumulated depreciation, and adjust with the gain or loss on disposal. This is why the described entry is the correct approach.