Can someone please explain this easily and a way I'll remember!
a fixed asset is something that you own that the cost doesn't vary i.e. buildings is 300,000 euro each year. Depreciation is when you subtract the cost from the depreciation and you are left with your nbv value :)
Any depreciation that has been charged on an asset over its life must be removed from the depreciation account (debit) and transferred to the disposal account (credit) when it has been disposed.
Eg. If asset was worth 300,000, depreciation was 10% per annum, asset was sold after 3 yrs....
Depr each year is 10% of 300,000 = 30,000
After 3 yrs total depr charged would be 30,000 x 3 yrs = 90,000
Depr account = debit 90,000 Disposal account = credit 90,000
Asset account = 300,000 credit Disposal account = 300,000 debit
Balancing figure in Disposal account is a Profit or Loss