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    • The disposal account is there in order to be able to calculate the profit or loss on disposal.

      The account itself is not classified under any headings. The profit or loss on disposal appears in the Statement of profit or loss under the heading expenses (as is explained in the lectures).

  2. Good evening sir. Sir I qualified PIPFA Pakistan institute of public finance accountant. Sir still your lectures are very very good .i really gain knowledge from it. Sir from depth of my heart ? I appreciate your lectures and study material

  4. GOOD DAY SIR I DNT KNW IF ITS JUST ME BUT I DIDNT GET 800 CAN U EXPLAIN TO ME PLS HOW U COME BY IT . CAUSE WEN I TOOK 7700-6500 I GOT 1200 N NOT 800. SO NOW IM A BIT CONFUSE PLS HELP

    • Please do not write in capital letters.

      I really do not know why you should want to subtract 6,500 from 7,700!!

      On the debit side is 15,000 and on the credit side is 7,700 and 6,500. The missing figure to make both sides add up to 15,000 is 800.

      I do suggest that you watch the lecture again. I assume you have watched all the previous lectures – if not then you should, there is no point in just watching one lecture on its own.

  5. Thank you Mr Moffat for your thorough explanations. Today I learnt something new by reading through some of the comments here. I had also been used to the profit on sale being listed under other income on the income statement. Even though it has the same effect having it as negative expense under expenses at the end of it all, your explanation about depreciation having been over or under charged makes a lot of sense.

  6. Hi!
    In the sale of noncurrent asset (example 4), can we just have a compound entry ( debit Accumulated depreciation, debit cash, debit loss on sale and credit car) instead of creating the disposal account?

    Many thanks!

    • In practice you can certainly have a “compound entry”, although it is more normal to create a separate disposal account (especially if there are lots of separate disposals during the year).

      For the exam it is largely irrelevant anyway because there is not much testing of debits and credits. However, to be safe do make sure you are aware of the disposal account just in case it is mentioned.

  8. Hi there,

    Firstly i would just like to say what great help these videos and the other material you offer is.

    In this video you mention about a book with more information. What is the book or text you are referring too?

    • It would still be under expenses, but would appear as a negative expense.

      (The reason is that a profit or loss on sale occurs because the depreciation that had been charged in previous years was either more or less than it would have been if we had known in advance exactly how much we would sell the asset for. So….the profit or loss on sale is really a ‘correction’ to the depreciation charges.)

      • Please can you explain more what you mean by a negative expense if it was a profit on the sale of the car

      • Whereas a loss on sale means less profit and it listed as one of our expenses, a profit on sale means more profit.

        However we still show it in the list of expenses, but show it as a negative figure. So, instead of increasing the total of the expenses (which it would if it was a loss), because it is a negative figure it reduced the total of the expenses.

  10. Hi John,
    Would the sale of the car ($6,500) show up as an extra item on the Balance sheet – or is it just that the cash would show an increase in current assets?

    • The Statement of financial position only shows assets, liabilities and capital.

      Since the car no longer belongs to the company, it can not appear on the Statement.

      What will appear is a higher cash balance (or higher receivables it if was sold on credit) than would otherwise have appeared.

  12. 11:57 Is that right or am i doing something wrong?

    Disposal Acc
    ————————————————–

    How did you get 1700??? Isit not 800 — – 15,000 – 6500-7700 ???

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