Assets & depreciation · Level: Exam specials
Journal entry: Selling an asset at a loss
If the sale brings less than the carrying amount, the difference is a loss (debit) and the asset is removed at its full carrying amount.
Worked example
We sell used office equipment (carrying amount £11,700.00) for £10,700.00 plus 20% VAT, paid into the bank. Book it in one entry.
Correct journal entry
Bank £12,840.00, Loss on disposal £1,000.00 / Office equipment £11,700.00, Output VAT £2,140.00
Debit
Bank£12,840.00
Loss on disposal£1,000.00
Credit
Office equipment£11,700.00
Output VAT£2,140.00
Why?
- Bank: asset increases → debit
- Loss on disposal: expense incurred → debit
- Office equipment: asset decreases → credit
- Output VAT: liability increases → credit
Calculation
- VAT: 20% of £10,700.00 = £2,140.00
- Gross amount: £10,700.00 + £2,140.00 = £12,840.00
- Loss: £11,700.00 − £10,700.00 = £1,000.00
Typical mistake
Removing the asset at the selling price only.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
We sell used office equipment (carrying amount £14,700.00) for £13,000.00 plus 20% VAT, paid into the bank. Book it in one entry.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for selling an asset at a loss?
Example: Bank £12,840.00, Loss on disposal £1,000.00 / Office equipment £11,700.00, Output VAT £2,140.00.
How do I recognise this case?
If the sale brings less than the carrying amount, the difference is a loss (debit) and the asset is removed at its full carrying amount.
What is the typical mistake?
Removing the asset at the selling price only.