Calculate gain or loss on disposal
Remove an asset's cost and accumulated depreciation, compare proceeds with carrying amount and record a disposal gain or loss.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover Topic 1.3 only. Practice is self-checked, not an official Cambridge grade; the separately published 2029 syllabus, timed papers and human subject-teacher review remain outstanding.
Before you begin
- Topics 1.1 and 1.2 introduce business resources, equity, double entry and period profit. Use those ideas when recording non-current assets.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
How is carrying amount under the cost model usually calculated before disposal?
What you will learn
- Calculate carrying amount at disposal
- Calculate a profit or loss on disposal
- Record cash proceeds and remove ledger balances
Compare proceeds with carrying amount
At disposal, calculate carrying amount at the disposal date: cost less accumulated depreciation and other required adjustments. Profit or loss on disposal = proceeds − carrying amount.
Positive difference is a profit; negative difference is a loss. Proceeds are the consideration received, not the original asset cost. The result is reported separately from ordinary sales revenue.
Clear the asset accounts
A disposal account can collect the asset's cost, accumulated depreciation, proceeds and balancing gain or loss. Remove the asset's original cost and accumulated depreciation so the disposed item no longer remains in the statement of financial position.
For a part-exchange, the trade-in allowance is disposal consideration under the question's terms; the new asset is recorded separately. Compare the allowance with the old asset's carrying amount to find the disposal result.
Pause and explain
A vehicle's carrying amount is $18,000 and the buyer pays $14,000. What is the result?
Worked example
A machine cost $36,000 and has accumulated depreciation of $27,000. It is sold for $7,500. Calculate the disposal result.
Show the worked solution
- Carrying amount = 36,000 − 27,000 = $9,000.
- Profit or loss = proceeds − carrying amount = 7,500 − 9,000.
- The negative $1,500 is a loss.
Answer Carrying amount is $9,000. Disposal proceeds are $7,500, so the business makes a $1,500 loss on disposal.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Equipment cost $22,000, accumulated depreciation is $16,500 and sale proceeds are $6,000. Find the disposal result.
Give me a hint
Find carrying amount before comparing to proceeds.
Compare my reasoning
- Carrying amount = 22,000 − 16,500 = $5,500.
- Proceeds exceed carrying amount by 6,000 − 5,500 = $500.
- The result is a $500 profit.
$500 profit on disposal.
Look for these in your work
- Carrying amount correct
- Difference correct
- Profit identified
An asset cost $48,000 and accumulated depreciation is $30,000. It is traded in for an allowance of $15,000 against a new machine. Calculate the old asset's disposal result.
Give me a hint
Treat the allowance as consideration for the old asset, then compare with carrying amount.
Compare my reasoning
- Old carrying amount = 48,000 − 30,000 = $18,000.
- Trade-in allowance = $15,000.
- 15,000 − 18,000 = −$3,000, a loss.
The old asset has a carrying amount of $18,000 and a trade-in allowance of $15,000, so the loss is $3,000.
Look for these in your work
- Old carrying amount correct
- Allowance treated as proceeds
- Loss correct
A business sold an asset for $9,000. Its accountant compared proceeds with original cost of $25,000 and reported a $16,000 loss. What else is needed to calculate the correct result?
Give me a hint
Original cost alone is not the asset's carrying amount at sale.
Compare my reasoning
- Find accumulated depreciation up to the disposal date.
- Calculate carrying amount as cost less accumulated depreciation and other required adjustments.
- Compare the $9,000 proceeds with that amount.
The $16,000 figure is not the disposal loss unless carrying amount equals original cost. Find depreciation and other adjustments, then compare proceeds with carrying amount.
Look for these in your work
- Missing balance identified
- Carrying amount calculated correctly
- Comparison method stated
Common mistakes
- Comparing proceeds directly with original cost
- Leaving accumulated depreciation in the ledger after disposal
- Including disposal proceeds as ordinary sales revenue
What can you explain now?
An asset has a carrying amount of $10,000 and is sold for $12,500. What is the result?
Compare with the explanation
$2,500 profit
Proceeds exceed carrying amount by $2,500.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Write the disposal formula and explain what must be removed from the ledger.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.