Identifying entries posted to the accounting ledger after sale of asset

This support note applies to:

AE Assets (AU)

Article ID: 28280

In MYOB Accountants Enterprise Assets (AE Assets) when a ledger is integrated with a AE MAS or Accounts the transactions are generated by AE Assets and posted to the accounting ledger automatically.

Examples of entries posted into the accounting ledger by AE Assets upon a sale of an asset are detailed for the following situations:

Sale of an Asset with depreciation cost limit;
Sale of an Asset without depreciation cost limit.

For details on how to sell an asset refer to Selling an asset in AE Assets

Sample Case

A motor vehicle is purchased on 1 February 2000 for $60,000 and sold on 31 May 2001 for $56,000. The rate used is the diminishing value method of 22.5%. Example 1 does not involve a depreciation cost limit, example 2 includes a depreciation cost limit of $55,134.

Example 1: without depreciation cost limit

Total depreciation $16,811 ($5,581+$11,230).

Being: Depreciation year one $5,581 ($60,000*22.5%*151/365.25).

Where: $60,000 is Purchase consideration, 22.5% is the depreciation rate, 151 is the number of days between 1 February 2000 and 30 June 2000. 365.25 is the number of days in a year. Depreciation year two $11,230 ($54,419*22.5%*335/365.25).

Where: $54,419 is the opening wdv at the start of year 2 ($60,000-$5581) Year one depreciation. 22.5% is the depreciation rate, 335 is the number of days between 1 July 2000 and 31 May 2001. 365.25 is the number of days in a year.

Profit on sale is calculated as: $12,811 Profit on sale ($56,000 + $16,811 - $60,000)

Where: $56,000 is the sale consideration, $16,811 is the total depreciation, $60,000 is the purchase consideration

Original cost and consideration amounts of an asset entered into AMS are net of GST. For example, if asset cost is $66,000.00 including GST only $60,000.00 is posted to the balance sheet asset account. This is done automatically when the gross amount is entered and the appropriate tax level applied to the purchase transaction.

Automatic transactions posted to the accounting ledger for example 1

Profit and Loss - Asset Realisation Account	Debit	$60,000.00	Original cost of asset
Balance Sheet - Asset	Credit	$60,000.00	Original cost of asset
Balance Sheet - Accumulated Depreciation	Debit	$16,811.00	Accumulated Depreciation
Profit and Loss - Asset Realisation Account	Credit	$16,811.00	Accumulated Depreciation
Profit and Loss - Asset Realisation Account	Debit	$12,811.00	Assessable profit on sale
Profit and Loss - Profit on sale of Non-current Asset	Credit	$12,811.00	Assessable profit on sale

The balance of the Asset Realisation account at this point is $56,000.00, ie the sale consideration.

Manual transaction required to finalise disposal of asset

Profit and Loss - Asset Realisation Account	Credit	$56,000.00	Sale consideration
Balance Sheet - Bank	Debit	$56,000.00	Sale consideration

The balance of the Asset Realisation account is now zero.

Example 2: with depreciation cost limit

Total Depreciation $15,448 ($5,128+$10,320).

Being: Depreciation year one $5,128 ($55,134*22.5%*151/365.25).

Where: $55,134 is the depreciation cost limit, 22.5% is the depreciation rate,151 is the number of days between 1 February 2000 and 30 June 2000. 365.25 is the number of days in a year. Depreciation year two $10,320 ($50,006*22.5%*335/365.25).

Where: $50,006 is the opening wdv at the start of year 2 ($55,134-$5128) Year one depreciation.

Where: 22.5% is the depreciation rate, 335 is the number of days between 1 July 2000 and 31 May 2001. 365.25 is the number of days in a year.

Profit on sale is calculated as: Assessable profit on sale $11,771.90 ($51,457.90-($55,134 - $15,448))

Being: Adjusted sale price $51,457.90 ($56,000*$55,134/$60,000)

Where: $56,000 is the sale consideration, $55,134 is the depreciation cost limit, $15,448 is the total depreciation, $60,000 is the purchase consideration

Automatic transactions posted to the accounting ledger for example 2

Profit and Loss - Asset Realisation Account	Debit	$60,000.00	Original cost of asset
Balance Sheet - Asset	Credit	$60,000.00	Original cost of asset
Balance Sheet - Accumulated Depreciation	Debit	$15,448.00	Accumulated Depreciation
Profit and Loss - Asset Realisation Account	Credit	$15,448.00	Accumulated Depreciation
Profit and Loss - Asset Realisation Account	Debit	$11,771.90	Assessable profit on sale
Profit and Loss - Profit on sale of Non-current Asset	Credit	$11,771.90	Assessable profit on sale

The value of the Asset revaluation reserve is $56,323.90.

Manual transaction required to finalise disposal of asset

Balance Sheet - Bank	Debit	$56,000.00	Sale consideration
Profit and Loss - Asset Realisation Account	Credit	$56,000.00	Sale consideration

A balance of $323.90 remains in the Asset Revaluation Reserve due to the depreciation over the life of the asset having been calculated on the depreciation cost limit instead of the actual original cost of the asset.

You may deal with this amount at your discretion.