Why is "Omitting the accumulated depreciation transfer" a common mistake in Disposal Account?

Why it happens: Focusing only on cost and proceeds. How to avoid it: Always credit the disposal account with the asset's accumulated depreciation (Dr Provision, Cr Disposal); otherwise the profit/loss is wrong. Source: 9706 Examiner Reports

Why is "Putting the cost on the credit side of the disposal account" a common mistake in Disposal Account?

Why it happens: Confusing the transfers. How to avoid it: Cost is DEBITED to disposal (Cr the asset account). Depreciation and proceeds are CREDITED to disposal. Source: 9706 Examiner Reports

Why is "Transferring the whole asset/provision balance for one disposal" a common mistake in Disposal Account?

Why it happens: Not isolating the disposed asset. How to avoid it: Transfer only the DISPOSED asset's cost and accumulated depreciation, not the totals for all assets. Source: 9706 Examiner Reports

Why is "Mishandling part-exchange (netting the new asset)" a common mistake in Disposal Account?

Why it happens: Treating the trade-in as a cost reduction. How to avoid it: Credit the trade-in to disposal (as proceeds) and debit it to the new asset; record the new asset at its FULL cost. Source: 9706 Examiner Reports

Why is "Putting the profit/loss on the wrong side" a common mistake in Disposal Account?

Why it happens: Not reading the balancing figure. How to avoid it: A profit balances on the DEBIT side; a loss balances on the CREDIT side. Then transfer it to the SOPL. Source: 9706 Examiner Reports

Why is "Recording the proceeds as sales instead of through disposal" a common mistake in Disposal Account?

Why it happens: Cash received looks like sales. How to avoid it: Proceeds go to the disposal account (Cr Disposal), not to sales; only the profit/loss reaches profit. Source: 9706 Examiner Reports

Cambridge International A Levels Accounting (9706)

Disposal Account

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Detailed Study Notes

Detailed notes on Accounting for Non-Current Assets for Cambridge International A Levels Accounting, covering key concepts, explanations, examples, and exam-focused revision points.

The Disposal Account — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

The ledger account that records the sale of a non-current asset and reveals the profit or loss. Learn exactly what goes on each side — cost in, accumulated depreciation and proceeds out — how the balancing figure is the profit or loss, and how to handle part-exchange entries.

At a glance

The disposal account brings together everything about the asset being sold to find the profit/loss.
Debit: the cost of the asset (transferred from the asset account).
Credit: the accumulated depreciation (from the provision) and the proceeds (or trade-in).
The balancing figure is the profit or loss on disposal.
A debit balance c/d = profit on disposal; a credit balance c/d = loss on disposal.
Part-exchange: the trade-in allowance is credited to the disposal account and debited to the new asset.
After disposal, the asset's cost and depreciation are fully removed from the books.

What you’ll learn

Mapped to the Cambridge International A Level 9706 syllabus (2026-2028).

1.3.2 — Prepare the disposal account (including entries for part exchange).
1.3.2 — Determine the profit or loss on disposal as the balancing figure.
Link 1.3.2 — the disposal account collects the cost, accumulated depreciation and proceeds.

What goes in the disposal account

Cost in on the debit; depreciation and proceeds out on the credit; the balance is the profit/loss.

When an asset is sold, three transfers are made into a disposal account, and the balancing figure is the profit or loss:

Disposal account
Debit	Credit
Cost of asset (from asset account)	Accumulated depreciation (from provision)
Profit on disposal (if a profit)	Proceeds / trade-in allowance
	Loss on disposal (if a loss)

The three transfers:

Remove the cost: Dr Disposal, Cr Asset account (with the cost).
Remove the accumulated depreciation: Dr Provision for depreciation, Cr Disposal.
Record the proceeds: Dr Bank (or new asset, for a trade-in), Cr Disposal.

The two sides are then totalled; the difference is the profit or loss on disposal, transferred to the statement of profit or loss.

Dr Disposal with the cost (from the asset account).
Cr Disposal with the accumulated depreciation (from the provision).
Cr Disposal with the proceeds (or trade-in allowance).
Balancing figure = profit or loss on disposal.

See the full worked example for disposal account →

Reading the balancing figure

A debit balance to carry down means a profit; a credit balance means a loss.

The disposal account 'self-calculates' the profit or loss:

If the credit side (depreciation + proceeds) exceeds the debit side (cost), the balancing figure needed on the debit side is a profit on disposal (transferred to the statement of profit or loss as income).
If the debit side (cost) exceeds the credit side, the balancing figure on the credit side is a loss on disposal (an expense).

Worked example — machine cost $30,000, accumulated depreciation $22,000, sold for $11,000:

Disposal account	$		$
Machine (cost)	30 000	Provision for depreciation	22 000
Profit on disposal (SOPL)	3 000	Bank (proceeds)	11 000
	33 000		33 000

The $3,000 debit balancing figure is the profit on disposal.

Credit side > debit side → profit (balancing figure on the debit).
Debit side > credit side → loss (balancing figure on the credit).
The profit/loss is transferred to the statement of profit or loss.
Both sides must total the same once the profit/loss is inserted.

See the full worked example for disposal account →

Part-exchange in the disposal account

The trade-in allowance replaces 'bank proceeds' and is debited to the new asset.

For a part-exchange, the proceeds of the old asset are the trade-in allowance, so:

Credit the disposal account with the trade-in allowance (instead of bank).
Debit the new asset account with the same trade-in allowance (it is part of the new asset's cost settled by the old one).
Pay the balance of the new asset's cost by bank.

Example — old vehicle (cost $25,000, accumulated depreciation $18,000) traded in for $8,000 against a new vehicle costing $30,000:

Disposal account: Dr cost 25,000; Cr provision 18,000, Cr new vehicle (trade-in) 8,000; balancing figure = $1,000 profit.
New vehicle account: Dr disposal (trade-in) 8,000 + Dr bank 22,000 = cost $30,000.

So the trade-in appears on both the disposal account (as proceeds) and the new asset account (as part of its cost).

Trade-in allowance is credited to the disposal account (as proceeds).
The same allowance is debited to the new asset account.
Pay the balance of the new asset's cost by bank.
The new asset is recorded at its full cost.

See the full worked example for disposal account →

After the disposal: the books are clean

The asset's cost and its accumulated depreciation are fully removed.

Once the disposal is complete, the sold asset has been entirely removed from the books:

Its cost has gone from the asset account (credited out, debited to disposal).
Its accumulated depreciation has gone from the provision account (debited out, credited to disposal).
The cash/trade-in has been recorded.
The profit or loss has been taken to the statement of profit or loss.

This is why a disposal account is needed rather than just adjusting balances — it provides a clear, auditable record of the transaction and produces the profit or loss as the balancing figure. The remaining asset and provision balances then correctly reflect only the assets still owned.

Cost removed from the asset account; depreciation removed from the provision.
Cash/trade-in recorded; profit/loss to the SOPL.
The disposal account gives a clear, auditable record.
Remaining balances reflect only assets still owned.

Quick recap

Disposal account: Dr cost; Cr accumulated depreciation and proceeds (or trade-in).
The balancing figure is the profit or loss on disposal.
Debit balancing figure = profit; credit balancing figure = loss.
Part-exchange: trade-in credited to disposal, debited to the new asset (recorded at full cost).
After disposal, the asset's cost and depreciation are fully removed.
Transfer only the disposed asset's figures, not the whole balance.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

Disposal: Dr cost; Cr accumulated depreciation + proceeds/trade-in.
Profit/loss on disposal = the balancing figure.
Debit balancing figure = profit; credit = loss.
Part-exchange: trade-in credited to disposal AND debited to the new asset (at full cost).

How it’s examined

Frequently tested on Paper 2 and Paper 3: Prepare the disposal account (commonly 4-6 marks, marked per correct entry and the profit/loss). The 9706/22 (Feb-Mar 2024) Q2 asked candidates to prepare a vehicle disposal account [4]. Examiner reports note candidates omitting the accumulated depreciation transfer or mishandling part-exchange.

Sources: Cambridge International AS & A Level Accounting 9706 syllabus (2026-2028); 9706/22 Paper 2 question paper & mark scheme, Feb/Mar 2024 (Q2); 9706 Examiner Reports, 2022-2024. Last reviewed 2026-06-17.

Take this whole topic with you

Step-by-step worked examples — Disposal Account

Step-by-step solutions to past-paper-style questions on disposal account, written exactly the way a tutor would explain them at the board.

Question type:

1State the disposal entries (4 marks)
Getting startedIdentify & classify• 9706 Paper 1/2 style• disposal, AO1
Question
An asset is sold for cash. State the double entry for each transfer into the disposal account: (a) the cost; (b) the accumulated depreciation; (c) the proceeds. (4 marks)
Step-by-step solution
1. Step 1
  (a) Cost: Dr Disposal, Cr Asset account.
2. Step 2
  (b) Accumulated depreciation: Dr Provision for depreciation, Cr Disposal.
3. Step 3
  (c) Proceeds: Dr Bank, Cr Disposal.
Answer
(a) Dr Disposal, Cr Asset; (b) Dr Provision, Cr Disposal; (c) Dr Bank, Cr Disposal.
Examiner tip
Cost is debited to disposal; depreciation and proceeds are credited to it.
2Disposal account with a profit (5 marks)
Building confidenceMulti-step problem• disposal, AO2
Question
A machine cost $36,000 with accumulated depreciation of$ 27,000. It was sold for $12,000 cash. Prepare the disposal account. (5 marks)
Step-by-step solution
1. Step 1
  Dr cost 36,000.
2. Step 2
  Cr provision for depreciation 27,000; Cr bank 12,000 (total credit 39,000).
3. Step 3
  Credit > debit by 3,000 → balancing figure is a profit on disposal $3,000 (debit).
Answer
Dr: cost 36,000 + profit 3,000; Cr: provision 27,000 + bank 12,000 = 39,000. Profit $3,000.
Examiner tip
The profit is the debit balancing figure, transferred to the SOPL.
3Disposal account with a loss (5 marks)
Building confidenceMulti-step problem• disposal, AO2
Question
A vehicle cost $28,000 with accumulated depreciation of$ 16,000. It was sold for $9,000 cash. Prepare the disposal account. (5 marks)
Step-by-step solution
1. Step 1
  Dr cost 28,000.
2. Step 2
  Cr provision 16,000; Cr bank 9,000 (total credit 25,000).
3. Step 3
  Debit > credit by 3,000 → balancing figure is a loss on disposal $3,000 (credit).
Answer
Dr: cost 28,000; Cr: provision 16,000 + bank 9,000 + loss 3,000 = 28,000. Loss $3,000.
Examiner tip
The loss is the credit balancing figure (an expense in the SOPL).
4Disposal with part-exchange (6 marks)
StretchMulti-step problem• part-exchange, AO2
Question
An old vehicle (cost $22,000, accumulated depreciation$ 15,500) is traded in for $7,000 against a new vehicle costing$ 34,000. Prepare the disposal account and state the profit or loss. (6 marks)
Step-by-step solution
1. Step 1
  Dr cost 22,000.
2. Step 2
  Cr provision 15,500.
3. Step 3
  Cr new vehicle account (trade-in) 7,000 — the proceeds.
4. Step 4
  Total credit = 22,500; debit 22,000 → balancing figure = $500 profit (debit).
Answer
Dr: cost 22,000 + profit 500; Cr: provision 15,500 + trade-in 7,000 = 22,500. Profit $500.
Examiner tip
The trade-in is credited to disposal AND debited to the new vehicle account.
5Disposal with depreciation to date (6 marks)
StretchMulti-step problem• disposal, AO2
Question
A machine cost $50,000 (bought 1 Jan 2022, 20% straight-line, full year in purchase / none in disposal). It was sold for$ 16,000 in 2025. Prepare the disposal account. (6 marks)
Step-by-step solution
1. Step 1
  Annual depreciation = 20% × 50,000 = 10,000; years 2022-2024 = 3 → accumulated 30,000.
2. Step 2
  Dr cost 50,000.
3. Step 3
  Cr provision 30,000; Cr bank 16,000 (total credit 46,000).
4. Step 4
  Debit > credit by 4,000 → loss on disposal $4,000 (credit balancing figure).
Answer
Dr: cost 50,000; Cr: provision 30,000 + bank 16,000 + loss 4,000. Loss $4,000.
Examiner tip
Find accumulated depreciation to the date of sale before preparing the account.
6Disposing of one of several assets (6 marks)
StretchMulti-step problem• disposal, AO2
Question
Machinery (total cost $120,000, total provision$ 70,000) includes one machine that cost $20,000 with accumulated depreciation of$ 14,000. That machine is sold for $5,000. Prepare the disposal account for the machine sold. (6 marks)
Step-by-step solution
1. Step 1
  Use only the DISPOSED machine's figures: cost 20,000, depreciation 14,000.
2. Step 2
  Dr cost 20,000.
3. Step 3
  Cr provision 14,000; Cr bank 5,000 (total credit 19,000).
4. Step 4
  Debit > credit by 1,000 → loss on disposal $1,000 (credit balancing figure).
Answer
Dr: cost 20,000; Cr: provision 14,000 + bank 5,000 + loss 1,000. Loss $1,000.
Examiner tip
Transfer only the disposed machine's cost and depreciation — not the whole balances.
7Find the proceeds from the disposal account (5 marks)
StretchMulti-step problem• disposal, AO2
Question
A disposal account shows: Dr cost $40,000; Cr provision$ 33,000; and a profit on disposal of $2,000 (debit). Calculate the sale proceeds. (5 marks)
Step-by-step solution
1. Step 1
  Total debit side = cost 40,000 + profit 2,000 = 42,000.
2. Step 2
  Credit side must equal 42,000: provision 33,000 + proceeds.
3. Step 3
  Proceeds = 42,000 − 33,000 = $9,000.
Answer
Sale proceeds = $9,000.
Examiner tip
Both sides of the disposal account total the same; proceeds is the missing credit.
8Purpose of the disposal account (4 marks)
StretchWord problem• disposal, AO3
Question
Explain why a business prepares a disposal account when it sells a non-current asset. (4 marks)
Step-by-step solution
1. Step 1
  It removes the asset's cost and accumulated depreciation from the books cleanly.
2. Step 2
  It records the proceeds (or trade-in).
3. Step 3
  It calculates the profit or loss on disposal as the balancing figure.
4. Step 4
  It gives a clear, auditable record of the whole disposal in one place.
Answer
To remove the asset's cost and depreciation, record the proceeds, and reveal the profit/loss as the balancing figure — in one auditable record.
Examiner tip
The key purpose is to compute the profit/loss and clear the asset from the books.
9Effect of omitting the depreciation transfer (5 marks)
StretchWord problem• disposal, errors, AO2
Question
When preparing a disposal account, a student transferred the cost and proceeds but forgot to transfer the accumulated depreciation. Explain the effect on the profit or loss on disposal. (5 marks)
Step-by-step solution
1. Step 1
  Without the depreciation credit, the credit side is too low.
2. Step 2
  The disposal account compares cost (not carrying value) with proceeds.
3. Step 3
  So the calculation overstates the cost charged against the proceeds.
4. Step 4
  This understates any profit (or overstates a loss) by the omitted accumulated depreciation.
5. Step 5
  The correct comparison is proceeds vs carrying value (cost − accumulated depreciation).
Answer
The depreciation credit is missing, so the result is wrong by the accumulated depreciation — profit understated / loss overstated.
Examiner tip
Omitting the depreciation transfer is the single most common disposal error.
10Disposal result and depreciation policy (5 marks)
StretchWord problem• evaluation, AO3
Question
A disposal account repeatedly shows a profit on disposal. Explain what this suggests and one action the business could take. (5 marks)
Step-by-step solution
1. Step 1
  A profit means proceeds exceeded carrying value — the asset was depreciated too quickly.
2. Step 2
  This suggests the depreciation rate is too high (or useful life too short / residual value too low).
3. Step 3
  During ownership, profit was understated (depreciation overstated).
4. Step 4
  Action: review and possibly reduce the depreciation rate (or lengthen the useful life) to reflect the assets' actual lives.
5. Step 5
  This would give a more realistic carrying value and smoother profit.
Answer
Repeated profits suggest over-depreciation (rate too high); the business should review and reduce its depreciation rate / lengthen the useful life.
Examiner tip
Link the recurring profit to an over-aggressive policy and a sensible review.

Model Answers — Disposal Account

High-scoring sample answers for disposal account on the Cambridge IGCSE paper, with examiner-style notes mapping each response to the mark scheme and assessment objectives.

Question 1
9706 Paper 2 style3 marks
Q (3 marks). State the double entry for each transfer into the disposal account when a non-current asset is sold for cash: (a) cost; (b) accumulated depreciation; (c) proceeds.
Model answer
(a) Cost: Dr Disposal; Cr Asset account. (b) Accumulated depreciation: Dr Provision for depreciation; Cr Disposal. (c) Proceeds: Dr Bank; Cr Disposal.
Why this scores
Marking (point-based, 3). 1 mark each. Cost debited; depreciation and proceeds credited to disposal.
Question 2
9706 Paper 2 style4 marks
Q (4 marks). A machine cost $42,000 with accumulated depreciation of$ 31,000. It was sold for $14,000 cash. Prepare the disposal account.
Model answer
Disposal account

Dr $ Cr $
Machine (cost) 42 000 Provision for depreciation 31 000
Profit on disposal 3 000 Bank 14 000
45 000 45 000

Profit on disposal = $3,000 (to the statement of profit or loss).
Why this scores
Marking (point-based, 4). Cost debit (1); provision credit (1); bank credit (1); profit $3,000 (1).
Question 3
9706 Paper 2 style5 marks
Q (5 marks). A vehicle cost $34,000 with accumulated depreciation of$ 19,500. It was sold for $11,000 cash. Prepare the disposal account and state the profit or loss.
Model answer
Disposal account

Dr $ Cr $
Vehicle (cost) 34 000 Provision for depreciation 19 500
Bank 11 000
Loss on disposal 3 500
34 000 34 000

Loss on disposal = $3,500 (an expense in the statement of profit or loss).
Why this scores
Marking (point-based, 5). Cost debit (1); provision credit (1); bank credit (1); loss $3,500 on credit side (2).
Question 4
9706 Paper 2 style6 marks
Q (6 marks). A machine cost $64,000 (bought 1 Jan 2023, 25% straight-line on cost, full year in purchase / none in disposal). It was sold for$ 24,000 in 2026. Prepare the disposal account.
Model answer
Annual depreciation = 25% × 64,000 = 16,000. Years 2023, 2024, 2025 = 3 → accumulated 48,000.

Disposal account

Dr $ Cr $
Machine (cost) 64 000 Provision for depreciation 48 000
Profit on disposal 8 000 Bank 24 000
72 000 72 000

Profit on disposal = $8,000.
Why this scores
Marking (point-based, 6). Accumulated depreciation $48,000 (2); cost debit (1); provision + bank credits (2); profit$ 8,000 (1).
Question 5
9706 Paper 2/3 style6 marks
Q (6 marks). An old vehicle (cost $26,000, accumulated depreciation$ 18,000) is traded in for $6,500 against a new vehicle costing$ 35,000, with the balance paid by cheque. Prepare the disposal account and state the profit or loss.
Model answer
Disposal account

Dr $ Cr $
Vehicle (cost) 26 000 Provision for depreciation 18 000
New vehicle (part-exchange) 6 500
Loss on disposal 1 500
26 000 26 000

Loss on disposal = $1,500. (The new vehicle is recorded at $35,000: part-exchange $6,500 + cheque $28,500.)
Why this scores
Marking (point-based, 6). Cost debit (1); provision credit (1); trade-in $6,500 credit (2); loss$ 1,500 (1); new vehicle at full cost (1).
Question 6
9706 Paper 3 style6 marks
Q (6 marks). A business's machinery account shows total cost $200,000 and the provision$ 96,000. One machine, which cost $30,000 and had accumulated depreciation of$ 21,000, is sold for $7,500. Prepare the disposal account for the machine sold.
Model answer
Use only the disposed machine's figures (cost $30,000, accumulated depreciation $21,000).

Disposal account

Dr $ Cr $
Machine (cost) 30 000 Provision for depreciation 21 000
Bank 7 500
Loss on disposal 1 500
30 000 30 000

Loss on disposal = $1,500. (The remaining machinery cost $170,000 and provision$ 75,000 stay in the books.)
Why this scores
Marking (point-based, 6). Use only the disposed machine's figures (1); cost debit (1); provision $21,000 (1); bank$ 7,500 (1); loss $1,500 (2).
Question 7
9706 Paper 3 style5 marks
Q (5 marks). A disposal account shows the asset's cost of $55,000 debited, accumulated depreciation of$ 44,000 credited, and a loss on disposal of $2,500. Calculate the sale proceeds.
Model answer
The two sides of the disposal account must total the same. Debit side total = cost = 55,000. Credit side = provision 44,000 + proceeds + loss 2,500 = 55,000. Proceeds = 55,000 − 44,000 − 2,500 = $8,500.

(Check: carrying value = 55,000 − 44,000 = 11,000; proceeds 8,500 − 11,000 = −2,500 loss ✓.)
Why this scores
Marking (point-based, 5). Recognise both sides equal $55,000 (1); set up the credit side (2); proceeds$ 8,500 (2).
Question 8
9706 Paper 2/3 style4 marks
Q (4 marks). Explain the purpose of preparing a disposal account.
Model answer
The disposal account brings together, in one place, everything relating to the sale of a non-current asset. It is used to:

remove the asset's cost (from the asset account) and its accumulated depreciation (from the provision);

record the proceeds (or part-exchange allowance) received; and

reveal the profit or loss on disposal as the balancing figure, which is then transferred to the statement of profit or loss.

This gives a clear, auditable record of the disposal and ensures the remaining asset and provision balances reflect only the assets still owned.
Why this scores
Marking (point-based, 4). Remove cost & depreciation (~1.5); record proceeds (~1); profit/loss as balancing figure (~1.5).
Question 9
9706 Paper 3 style5 marks
Q (5 marks). When preparing a disposal account, a bookkeeper transferred the cost and the proceeds but forgot to transfer the accumulated depreciation of $18,000. Explain the effect of this omission on the profit or loss on disposal.
Model answer
By omitting the accumulated depreciation credit, the disposal account effectively compares the full cost of the asset with the proceeds, instead of comparing the carrying value (cost − accumulated depreciation) with the proceeds.

This makes the debit side (cost) too high relative to the credit side, so the calculated result is understated by $18,000 — a profit would be understated by $18,000 (or a loss overstated by $18,000).

The correct profit or loss is found only when the accumulated depreciation is transferred, so that the comparison is proceeds vs carrying value.
Why this scores
Marking (point-based, 5). Compares cost not carrying value (~2); result wrong by $18,000 / profit understated or loss overstated (~2); correct comparison is proceeds vs carrying value (~1).
Question 10
9706 Paper 3 style6 marks
Q (6 marks). A machine cost $80,000 (bought 1 Jan 2022, 20% reducing balance, full year in purchase / none in disposal). It was sold for$ 30,000 in 2025. Prepare the disposal account and state the profit or loss.
Model answer
Reducing balance: 2022: 20% × 80,000 = 16,000 → CV 64,000; 2023: 12,800 → CV 51,200; 2024: 10,240 → CV 40,960. (None in 2025.) Accumulated depreciation = 16,000 + 12,800 + 10,240 = 39,040. Carrying value = 80,000 − 39,040 = 40,960.

Disposal account

Dr $ Cr $
Machine (cost) 80 000 Provision for depreciation 39 040
Bank 30 000
Loss on disposal 10 960
80 000 80 000

Loss on disposal = $10,960.
Why this scores
Marking (point-based, 6). Reducing balance to date / accumulated $39,040 (2.5); cost debit + provision/bank credits (2.5); loss$ 10,960 (1).

Dr	$	Cr	$
Machine (cost)	42 000	Provision for depreciation	31 000
Profit on disposal	3 000	Bank	14 000
	45 000		45 000

Dr	$	Cr	$
Vehicle (cost)	34 000	Provision for depreciation	19 500
		Bank	11 000
		Loss on disposal	3 500
	34 000		34 000

Dr	$	Cr	$
Machine (cost)	64 000	Provision for depreciation	48 000
Profit on disposal	8 000	Bank	24 000
	72 000		72 000

Dr	$	Cr	$
Vehicle (cost)	26 000	Provision for depreciation	18 000
		New vehicle (part-exchange)	6 500
		Loss on disposal	1 500
	26 000		26 000

Dr	$	Cr	$
Machine (cost)	30 000	Provision for depreciation	21 000
		Bank	7 500
		Loss on disposal	1 500
	30 000		30 000

Dr	$	Cr	$
Machine (cost)	80 000	Provision for depreciation	39 040
		Bank	30 000
		Loss on disposal	10 960
	80 000		80 000

Key Definitions and Keywords — Disposal Account

Definitions to memorise and the exact keywords mark schemes credit for disposal account answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Disposal account
Examiner keyword
A ledger account that records the sale of a non-current asset — gathering its cost, accumulated depreciation and proceeds to reveal the profit or loss on disposal.
Cost transfer
Examiner keyword
Removing the asset's cost from the asset account: Dr Disposal, Cr Asset account.
Accumulated depreciation transfer
Examiner keyword
Removing the asset's accumulated depreciation from the provision: Dr Provision, Cr Disposal.
Proceeds / trade-in
Examiner keyword
The amount received on disposal, credited to the disposal account (Dr Bank, or Dr new asset for a part-exchange).
Balancing figure (profit/loss)
Examiner keyword
The figure that balances the disposal account — a debit balancing figure is a profit; a credit balancing figure is a loss.
Part-exchange entries
The trade-in allowance is credited to the disposal account and debited to the new asset account (which is recorded at full cost).

Common Mistakes and Misconceptions — Disposal Account

The traps other students keep falling into on disposal account questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Omitting the accumulated depreciation transfer
9706 Examiner Reports
Why it happens
Focusing only on cost and proceeds.
How to avoid it
Always credit the disposal account with the asset's accumulated depreciation (Dr Provision, Cr Disposal); otherwise the profit/loss is wrong.
✕Putting the cost on the credit side of the disposal account
9706 Examiner Reports
Why it happens
Confusing the transfers.
How to avoid it
Cost is DEBITED to disposal (Cr the asset account). Depreciation and proceeds are CREDITED to disposal.
✕Transferring the whole asset/provision balance for one disposal
9706 Examiner Reports
Why it happens
Not isolating the disposed asset.
How to avoid it
Transfer only the DISPOSED asset's cost and accumulated depreciation, not the totals for all assets.
✕Mishandling part-exchange (netting the new asset)
9706 Examiner Reports
Why it happens
Treating the trade-in as a cost reduction.
How to avoid it
Credit the trade-in to disposal (as proceeds) and debit it to the new asset; record the new asset at its FULL cost.
✕Putting the profit/loss on the wrong side
9706 Examiner Reports
Why it happens
Not reading the balancing figure.
How to avoid it
A profit balances on the DEBIT side; a loss balances on the CREDIT side. Then transfer it to the SOPL.
✕Recording the proceeds as sales instead of through disposal
9706 Examiner Reports
Why it happens
Cash received looks like sales.
How to avoid it
Proceeds go to the disposal account (Cr Disposal), not to sales; only the profit/loss reaches profit.

Disposal Account

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1State the disposal entries (4 marks)

2Disposal account with a profit (5 marks)

3Disposal account with a loss (5 marks)

4Disposal with part-exchange (6 marks)

5Disposal with depreciation to date (6 marks)

6Disposing of one of several assets (6 marks)

7Find the proceeds from the disposal account (5 marks)

8Purpose of the disposal account (4 marks)

9Effect of omitting the depreciation transfer (5 marks)

10Disposal result and depreciation policy (5 marks)

Disposal account

Cost transfer

Accumulated depreciation transfer

Proceeds / trade-in

Balancing figure (profit/loss)

Part-exchange entries

✕Omitting the accumulated depreciation transfer

✕Putting the cost on the credit side of the disposal account

✕Transferring the whole asset/provision balance for one disposal

✕Mishandling part-exchange (netting the new asset)

✕Putting the profit/loss on the wrong side

✕Recording the proceeds as sales instead of through disposal