Couple of questions- please help

[24309]

1. What's the double effect on the accounting equation of a loss on disposal of NCA? for example a loss of 1000 would bring OE down 1000 but how does it balance?

2. When you sell NCA for cash (lets say 10,000) can you debit bank 100000 in the general journal or can it not go through there? What if they give you a cash receipts journal, because then youur general journal won't balance?

3. How do you define what a "Disposal of NCA account" is ? Just a temporary account?

[24309]

And also...
why is Bank Overdraft omitted from the calculation of QA ratio?

[vcehuge]

1) Im really not sure how to explain this but ill try -
 Vehicle - 25000
Accumulated depreciation - 23000
Cash earnt from trade in - 1000   
Profit/Loss on disposal - 1000

Assets- Minus 25000, + 23000  (as 23000 of negative asset removed), +1000 (trade in value for bank), -1000 OE

-1000 A, -1000 OE is ending impact on both sides

If it makes sense what im saying its to balance out the loss of the vehicle, if the depreciation was correct then they likely would have earnt 2000 trade in value instead of the $1000 trade in and $1000 loss

2) Very good question i need to find this out as well
3) no idea
4) because banks generally wont call up bank overdrafts overnight, they'd probably give ample notice

[Random_Guy]

1. What's the double effect on the accounting equation of a loss on disposal of NCA? for example a loss of 1000 would bring OE down 1000 but how does it balance?

2. When you sell NCA for cash (lets say 10,000) can you debit bank 100000 in the general journal or can it not go through there? What if they give you a cash receipts journal, because then youur general journal won't balance?

3. How do you define what a "Disposal of NCA account" is ? Just a temporary account?

1. It's one of 3 entries which ultimately balance the decrease in Assets (due to the disposal of the asset), with the other two being Accumulated Depreciation and Bank/Sundry-Creditor.

2. You always record cash entries in the cash journals. It will balance in the General Ledger.

3. It's basically an account which allows the double-entry recording system to work.

3.

[24309]

1. What's the double effect on the accounting equation of a loss on disposal of NCA? for example a loss of 1000 would bring OE down 1000 but how does it balance?

2. When you sell NCA for cash (lets say 10,000) can you debit bank 100000 in the general journal or can it not go through there? What if they give you a cash receipts journal, because then youur general journal won't balance?

3. How do you define what a "Disposal of NCA account" is ? Just a temporary account?

1. It's one of 3 entries which ultimately balance the decrease in Assets (due to the disposal of the asset), with the other two being Accumulated Depreciation and Bank/Sundry-Creditor.

2. You always record cash entries in the cash journals. It will balance in the General Ledger.

3. It's basically an account which allows the double-entry recording system to work.

3.

So if you received 10000 for the NCA then this would go through cash receipts journal as "Disposal of NCA?" ? And in the general journal you wont credit "Disposal of NCA" by 10000, youd only do that in the general ledger?
And what if they dont give you a cash receipts journal? Do you still dont put it in the GJ?

[leiza88]

Seeing as question 1 has already been answered:

2 - Put it in the CRJ if given as it is a cash receipt. The general journal will still 'balance' as you are taking away the debit for bank, as well as the credit for disposal of the NCA.

3 - Yes, it's a temporary account only used for the disposal of the NCA. Much like the P/L summary.

4 - As the overdraft is not an obligation that must be immediately met as the bank won't suddenly demand payment for your overdraft. There are usually rules and contracts to go through before setting up an OD account.

[Anon123]

And also...
why is Bank Overdraft omitted from the calculation of QA ratio?

because the bank won't usually ask for the OD to be repayed - unless you are over or something

[abzzzz]

If its a cash sale, wont you need to add

Dr - Bank
CR- Disposal

in the general journal?

[likeialwaysdo]

And also...
why is Bank Overdraft omitted from the calculation of QA ratio?

because the higher your overbank draft limit, the more interest is paid on it, the bank is unlikely to ask for full payment as they are making more off the interest.