... the sale of an asset. First of all, cost and accumulated depreciation are transferred in from their accounts (cost to the debit and depreciation to the credit), introducing the net book value into the account. Proceeds of sale are credited, and the resulting balance is the profit (if credit) or loss (if debit) to be transferred to profit and loss account. Example 1 covers these entries (taken from Q2 of the June 2002 Paper 1.1 examination). Example 1 The following balances appeared in the balance sheet of Addax Limited at 31 March 2001. £ Plant and equipment - cost 840,000 Accumulated depreciation 370,000 In the year ended 31 March 2002 the following transactions took place: 1. Plant which cost £100,000 with a written down value of £40,000 was sold for £45,000 on 10 December. 2. New plant was purchased for £180,000 on 1 October 2001. It is the policy of the company to charge depreciation at ...

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