Paper 1 · November 2019 · Depreciation
The following account appeared in Tapiwa's ledger.
Machinery Disposal Account
Debit side: 2016 Jan 1 Machinery $8 000; Dec 31 Profit and loss 8 400
Credit side: 2016 Jan 1 Provision for depreciation $6 000; Jan 1 A.B. Moyo $2 400; total $8 400
What does the entry 'A.B. Moyo $2 400' represent?
Debit side: 2016 Jan 1 Machinery $8 000; Dec 31 Profit and loss 8 400
Credit side: 2016 Jan 1 Provision for depreciation $6 000; Jan 1 A.B. Moyo $2 400; total $8 400
What does the entry 'A.B. Moyo $2 400' represent?
ATapiwa bought machinery worth $2 400 on credit from Moyo.
BTapiwa paid $2 400 to Moyo.
CTapiwa received $2 400 from Moyo.
DTapiwa sold machinery worth $2 400 on credit to Moyo.
Explanation
The credit to the disposal account is the sale proceeds; because the double entry is in a personal account (A.B. Moyo) rather than cash or bank, the machinery was sold on credit to Moyo for $2 400. The $400 is the profit on disposal (2 400 - (8 000 - 6 000)).
ZIMSEC Principles of Accounting 4051/1, November 2019, Q33