Asset Depreciation

[shygirl295]

Can someone in lamens term explain the journey i need to do for this please

Bought a van in 2016 for £15k
Sold van in 2021 for £7000

Depreciation over a period of 5 years

How do i record this for the balance sheet please

[Darren_Smith]

Hi,

there are a few steps in disposing of a van - removing it from your accounts.

The first one is to establish how much depreciation you charged over the last 5 years. This figure will need to be removed from your accumulated depreciation charge.

For example, if you followed Capital Allowance methods and values, you might have charged 18% depreciation using the reducing balance method.

With the figures you stated, your Net Book Value and Accumulated Depreciation would be like this:

The Net Book Value (NBV) of the van would be 5,561 and the Accumulated Depreciation would be 9,439.

It is the NBV compared to the sale proceeds which shows if you have made a loss or a gain on the disposal of the van.

And with the figures we’ve used, you will have made a gain of 1,439 on the sale of the van

You would have to look back through your depreciation charges for the van for the last 5 years to get actual figures for the depreciation you charged against the van, but taking my 18% figure of 9,439, then the journal entry to dispose of the van would be like this one:

Note that these figures don’t take VAT into account - I’ve used net figures because I don’t know if you are registered for VAT.

This will leave you with a gain in the disposals account as below:

That’s how to record the disposal of the van and the subsequent gain in QuickFile.

You might have to take a look at your capital allowances though, because there could be a balancing charge that arises from this if you had to put some of the original cost of the van into the main pool - unlikely but possible.

Hope this helps

[shygirl295]

Hi

Thank you for this

Not sure how my accountant originally recorded the capital allowance so will look through their return for the year end i bought the vehicle.