Account for disposal of a non-current asset
Remove an asset's cost and accumulated depreciation, record proceeds and calculate the profit or loss on disposal.
Section 4.2 · Depreciation and disposal of non-current assets
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What amount is compared with sale proceeds to find a disposal profit or loss?
What you will learn
- Calculate net book value at disposal
- Prepare the disposal-account entries
- Transfer a disposal profit or loss to the income statement
Remove the original cost and related provision
On disposal, transfer the asset's original cost to the disposal account: debit Disposal and credit the asset account. Transfer its accumulated depreciation by debiting Provision for depreciation and crediting Disposal.
Record sale proceeds by debiting Bank and crediting Disposal. These entries remove the asset and its provision from the records and show the amount received.
Compare proceeds with carrying value
Net book value at disposal is cost less accumulated depreciation to the disposal date. Proceeds above net book value create a profit; proceeds below it create a loss. Transfer the balancing amount in Disposal to the statement of profit or loss.
Do not calculate profit by subtracting proceeds from original cost alone; accumulated depreciation must first be considered.
Pause and explain
An asset's net book value is $2,750 and it is sold for $3,100. What is the disposal result?
Worked example
A machine cost $10,000, accumulated depreciation is $6,400 and sale proceeds are $4,500. Calculate net book value and disposal profit.
Show the worked solution
- Net book value = 10,000 − 6,400 = $3,600.
- Profit on disposal = 4,500 − 3,600 = $900.
- Record Dr Bank $4,500; Cr Disposal, after transferring cost and provision.
Answer Net book value is $3,600 and profit on disposal is $900.
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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.
A vehicle cost $24,000, accumulated depreciation is $16,500 and proceeds are $6,800. Calculate its carrying value and disposal result.
Give me a hint
Subtract accumulated depreciation before comparing with proceeds.
Compare my reasoning
- Net book value = 24,000 − 16,500 = $7,500.
- Proceeds are $700 below net book value.
- The disposal creates a loss of $700.
Net book value $7,500; loss on disposal $700.
Look for these in your work
- Carrying value correct
- Comparison correct
- Loss identified
A machine cost $10,000, accumulated depreciation is $6,400 and proceeds are $4,500. Name the disposal-account entries for cost, provision and proceeds.
Give me a hint
Remove cost, remove accumulated depreciation, then record cash received.
Compare my reasoning
- Dr Disposal $10,000; Cr Machinery $10,000.
- Dr Provision $6,400; Cr Disposal $6,400.
- Dr Bank $4,500; Cr Disposal $4,500.
Transfer cost: Dr Disposal, Cr Machinery $10,000; provision: Dr Provision, Cr Disposal $6,400; proceeds: Dr Bank, Cr Disposal $4,500.
Look for these in your work
- Asset removed
- Provision removed
- Proceeds recorded
An asset with net book value $5,200 is sold for $4,850. State the disposal result and where it is transferred.
Give me a hint
Proceeds are lower than carrying value, so the difference is a loss.
Compare my reasoning
- Loss = 5,200 − 4,850 = $350.
- The disposal account has a debit balancing amount of $350.
- Transfer the loss to the statement of profit or loss.
Loss on disposal is $350 and is transferred to the statement of profit or loss.
Look for these in your work
- Difference correct
- Loss direction correct
- Transfer stated
Common mistakes
- Comparing proceeds directly with original cost
- Leaving accumulated depreciation attached after disposal
- Treating proceeds as ordinary sales income
What can you explain now?
Cost is $8,000, accumulated depreciation $5,000 and proceeds $2,400. Is there a profit or loss?
Compare with the explanation
Loss of $600
Net book value is $3,000; proceeds are $600 lower.
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Make it stick
What two amounts determine profit or loss when a non-current asset is disposed of?
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.