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Chapter 6

3.3 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 3 Step 4

Steps 1 and 2  Debit –  Debit –

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

Illustrations and further practice

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