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Generally, there are four events an entity must record in its books of accounts in relation
to the disposal of Property, plant and Equipment, which include the following:

(i) To eliminate the PPE from the books of accounts by crediting the non-current
asset account. Asset disposal reduces the balance of the asset’s account.
Dr Asset disposal account xxx
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Cr Property, plant and equipment account xxx
Being removal of the PPE from the statement of financial position at cost value
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(ii) To close the accumulated depreciation account associated with the disposed of
asset by debiting it.
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Dr Accumulated depreciation xxx

Cr Property, plant and equipment disposal account xxx
Being removal of accumulated depreciation of the disposed assets from the statement
of financial position

(iii) To record receipt of any proceeds from disposal of an asset, whether in the form
of cash or another asset as part exchange.

Dr Cash (Asset received) account xxx
Cr Asset disposal account xxx
Recording cash receipt (receivable) on disposal of an asset.

(iv) To determine and to record any gain or loss from disposal.

This is done by balancing the asset disposal account, hence transferring the
profit or loss to the statement of profit or loss.

Note. If the PPE account shows a difference on the debit side, there is a profit on

disposal.
Dr Property, plant and equipment disposal account xxx
Cr Statement of profit or loss xxx

If the PPE disposals account shows a difference on the credit side, there is loss on dis-
posal of an asset.
Dr Statement of profit or loss xxx

Cr Property, plant and equipment disposal account xxx

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