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Depreciation, Provisions and Reserves 251 II Balance b/d 1,80,000 End of Balance c/d 90,000 year the year Depreciation 90,000 1,80,000 1,80,000 III Balance b/d 2,70,000 End of Balance c/d 1,80,000 year the year Depreciation 90,000 2,70,000 2,70,000 IV Machinery 3,60,000 End of Balance c/d 2,70,000 year the year Provison for 90,000 Depreciation 3,60,000 3,60,000 7.9.1 Use of Asset Disposal Account Asset disposal account is designed to provide a complete and clear view of all the transactions involved in the sale of an asset under one account head. The concerned variables are the original cost of the asset, depreciation accumulated on the asset upto date, sale price of the asset, value of the parts of the asset retained for use, if any and the resultant profit or loss on disposal. The balance of this amount is transferred to the profit and loss account. This method is generally used when a part of the asset is sold and provision for depreciation account exists. Under this method, a new account titled Asset Disposal Account is opened. The original cost of the asset being sold is debited to the asset disposal account and accumulated depreciation amount appearing in provision for depreciation account relating to that asset till the date of disposal is credited to the asset disposal account. The net amount realised from the sale of the asset is also credited to this account. The balance of asset disposal account shows profit or loss which is transferred to profit and loss account. The advantage of this method is that it gives a full picture of all the transactions related to asset disposal at one place. The journal entries required for the preparation of asset disposal account is as follows: 1. Asset Disposal A/c Dr. (with the original cost of asset, To Asset A/c being sold) 2. Provision for Depreciation A/c Dr. (with the accumulated balance in To Asset Disposal A/c provision for depreciation account) 3. Bank A/c Dr. (with the net sales proceeds) To Asset Disposal A/c Asset Disposal Account may ultimately show a debit or credit balance. The debit balance on the account indicate loss on disposal and would be dealt with as follows: Reprint 2026-27