Expert: Arthur Naman - 4/28/2011

Question
QUESTION: Our office had throw away the furnitures, may I know that a/c entry below correct or not : --
Dr.    Asset written off (P/L)
Cr.    Furniture & Fitting (B/S)

There’s not gain or loss on above transaction, right ?

I’m wondering about the amount, because the furniture already bought & used for last 3 years, therefore, the amount for above entry should it be :( “COST – depreciation for last 3 years = Asset written off” ) ?

E.g. COST = 3300
    Accumulated depreciation for last 3 years = 2289.41
    Asset written off = 1010.59 (3300-2289.41)

Highly appreciated your advice with many thanks.

ANSWER: You are correct, when as asset is written off which has been depreciated, the
transaction is:

Asset          (B/S)  credit     -3,300.00
Accumulated depreciation         (B/S)   debit      2,289.41
Gain/loss on asset disposition   (I/S)   debit      1,010.59


---------- FOLLOW-UP ----------

QUESTION: Good day, Arthur

May i know that the accumulated depreciation from 2008 to APR 2011 is RM 2289.41, shall i fully capute it on B/S ? my query is last 2 yrs already booked it, shall i debit again on APR 2011 by full amount ? I already closed JAN/FEB/MAR 2011 account. i'm worry about duplication.OR I just capute APR depreciation on APR 2011 account closing ?

Purchase Description   COST   Dep-08  Dep-09   Dep-10  Dep-11  Write Off
22/09/2008  Table      3300   405.90  1067.92  673.86  141.73  1010.59


Thirdly, balance of RM 1010.59 should consider gain or loss ?

 

Thank you very much.

Answer
I am confused by several things you have written.

*  What is "RM" as in "RM 2289.41"?
*  What does "fully capute it on the B/S" mean"
*  When you say you "already closed JAN/FEB/MAR 2011" what do you mean - is your
business on the calendar year basis? If so your having closed January, February
and March is irrevelant.

One question which you did not mention is whether or not the half year
convention applies.

So, with all this in mind, if the half year convention applies, then you should
take 1/2 of the annual depreciation in the year of disposition; otherwise no
depreciation in the year of disposition is normally taken.

If the disposition takes place in April 2011, then you may have to make an
adjustment in that month to give you the correct book balance at the time of
disposition. Whatever the book balance is, it is an expense, not gain.

Any additional questions, please ask.