Page 99 - Microsoft Word - 00 - Prelims.docx

Non-current assets: disposal and revaluation

1.3 Disposal using a part-exchange agreement

A part-exchange agreement arises when an old asset is provided in part payment for
the new one, the balance of the new asset is then paid for in cash or a payable
created for the liability outstanding.

The procedure to record this transaction is very similar to the three-step process for a
cash disposal. The first two steps are identical; however steps 3 and 4 are as
follows:

Step 1 and 2 Step 3 Step 4

 Identical to before  Debit – Non-  Debit – Non-
current asset current asset
account account
 Credit – Disposal  Credit –
account Cash/Payable

Tutor notes guidance – discussion points

Take students through TYU 2 from Chapter 8 of the Study Text.

93