This is what we did to get there.
1) Take the asset at cost out of the books:
Debit Asset disposal account £10,000
Credit Asset at cost account £10,000
2) Take the assets accumulated depreciation out of the books:
Debit Asset accumulated depreciation account £6,000
Credit Asset disposal account £6,000
3) Account for the proceeds from the sale:
Debit Bank account £3,700
Credit Asset disposal account £3,7000
4) Finally, we have to account for the loss. This arises because we have received less than the book value. This appears as the balancing figure of £300. The more we would receive, the smaller this balancing figure would be, until after the breakeven point, it would be a balancing figure on the debit side. In that case, we would have a gain on disposal instead of a loss. The other side of this double entry is to debit the profit and loss account with £300.
Debit Profit and Loss account £300
Credit Asset disposal account £300
The £300 in the profit and loss account would be an expense to the business. It is basically an adjustment to the depreciation made in order to keep the accounting equation in balance.
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