Why is "Comparing proceeds with cost instead of carrying value" a common mistake in Profit or Loss on a Sale of a Non-Current Asset?

Why it happens: Forgetting to deduct accumulated depreciation. How to avoid it: Profit/loss = proceeds − CARRYING VALUE (cost − accumulated depreciation), not proceeds − cost. Source: 9706 Examiner Reports

Why is "Recording disposal proceeds as sales" a common mistake in Profit or Loss on a Sale of a Non-Current Asset?

Why it happens: Cash comes in. How to avoid it: Only the profit/loss on disposal affects profit (shown separately); the proceeds are never sales revenue. Source: 9706 Examiner Reports

Why is "Using the wrong accumulated depreciation at the date of sale" a common mistake in Profit or Loss on a Sale of a Non-Current Asset?

Why it happens: Not applying the year-of-disposal policy. How to avoid it: Compute accumulated depreciation to the date of sale per the stated policy (e.g. none in the year of disposal). Source: 9706 Examiner Reports

Why is "Recording the new asset net of the trade-in allowance" a common mistake in Profit or Loss on a Sale of a Non-Current Asset?

Why it happens: Treating the trade-in as a cost reduction. How to avoid it: The new asset is recorded at its FULL cost; the trade-in is the proceeds of the old asset (credited to disposal). Source: 9706 Examiner Reports

Why is "Confusing a profit and a loss" a common mistake in Profit or Loss on a Sale of a Non-Current Asset?

Why it happens: Not tracking the sign. How to avoid it: Proceeds ABOVE carrying value = profit; BELOW = loss. State which clearly. Source: 9706 Examiner Reports

Why is "Treating a profit on disposal as a trading gain" a common mistake in Profit or Loss on a Sale of a Non-Current Asset?

Why it happens: It increases profit. How to avoid it: It arises from imperfect depreciation estimates, not trading; show it separately from sales. Source: 9706 Examiner Reports

Cambridge International A Levels Accounting (9706)

Profit or Loss on a Sale of a Non-Current Asset

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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.

Profit or Loss on the Sale of a Non-Current Asset — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

When an asset is sold, the proceeds rarely equal its carrying value — the difference is a profit or loss on disposal. Learn to calculate it, why it arises (depreciation is only an estimate), how part-exchange (trade-in) works, and how the profit or loss is shown in the statement of profit or loss.

At a glance

Profit/loss on disposal = proceeds − carrying value (carrying value = cost − accumulated depreciation).
Proceeds > carrying value → profit on disposal (income); proceeds < carrying value → loss (expense).
It arises because depreciation is an estimate — useful life and residual value are rarely exactly right.
A profit means depreciation was charged too quickly (or residual value underestimated); a loss means too slowly.
Part-exchange (trade-in): the trade-in allowance acts as the proceeds for the old asset.
Shown in the statement of profit or loss as 'profit/loss on disposal' — not as sales revenue.
Only the profit or loss, not the full proceeds, affects profit.

What you’ll learn

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

1.3.2 — Calculate the profit or loss on disposal of a non-current asset.
1.3.2 — Record disposal (including entries for part exchange) and its effect on the statement of profit or loss.
Link 1.3.2 — the disposal account is the ledger mechanism for recording the profit/loss.

Calculating the profit or loss

Compare the proceeds with the carrying value at the date of sale.

When a non-current asset is sold, compare the proceeds with its carrying value at the date of sale:

$\text{Profit/(loss) on disposal} = \text{Proceeds} - \text{Carrying value}$

where carrying value = cost − accumulated depreciation at the date of sale.

Proceeds > carrying value → a profit on disposal (the asset was 'over-depreciated').
Proceeds < carrying value → a loss on disposal (the asset was 'under-depreciated').

Example. A machine cost $40,000, accumulated depreciation at the date of sale $31,000 (carrying value $9,000), sold for $11,000.

Profit on disposal = 11,000 − 9,000 = $2,000.

Loss example. Same machine sold for $7,500.

Loss on disposal = 7,500 − 9,000 = −$1,500 (a loss).

Profit/(loss) on disposal = proceeds − carrying value.
Carrying value = cost − accumulated depreciation at the date of sale.
Proceeds above carrying value = profit; below = loss.
Get the accumulated depreciation up to the date of sale right first.

See the full worked example for profit or loss on a sale of a non-current asset →

Why a profit or loss arises

Depreciation is only an estimate, so the carrying value rarely equals the sale price.

A profit or loss on disposal is not a sign of a real gain or expense in the usual sense — it arises because depreciation is based on estimates (of useful life and residual value) that are rarely exactly right.

A profit on disposal means the asset was depreciated too quickly — its carrying value fell below what it could be sold for (the useful life was estimated too short, or the residual value too low).
A loss on disposal means the asset was depreciated too slowly — its carrying value was above the sale price (the useful life was estimated too long, or the residual value too high).

So the profit or loss is really an adjustment for the imperfect depreciation estimate over the asset's life — a correction recognised when the asset finally leaves the business.

Depreciation uses estimates that are rarely exact.
Profit on disposal = depreciated too quickly (estimate too cautious).
Loss on disposal = depreciated too slowly (estimate too generous).
It corrects the cumulative estimate when the asset is sold.

Part-exchange (trade-in)

The trade-in allowance is the proceeds for the old asset.

Often an old asset is traded in against a new one. The part-exchange (trade-in) allowance acts as the proceeds of the old asset for the disposal calculation.

Example. An old vehicle (cost $25,000, accumulated depreciation $18,000 → carrying value $7,000) is traded in for $8,000 against a new vehicle priced at $30,000; the business pays the $22,000 balance by cheque.

Profit on disposal of the old vehicle = trade-in allowance − carrying value = 8,000 − 7,000 = $1,000.
The new vehicle is recorded at its full cost $30,000 (trade-in $8,000 + cheque $22,000).

Key entries: the trade-in allowance is credited to the disposal account (as proceeds) and debited to the new asset account (it reduces the cash paid but not the asset's cost).

Trade-in allowance = proceeds of the old asset.
Profit/loss on disposal = trade-in allowance − carrying value.
The new asset is recorded at its FULL cost.
Cash paid = new asset cost − trade-in allowance.

See the full worked example for profit or loss on a sale of a non-current asset →

Treatment in the statement of profit or loss

Shown as profit/loss on disposal — never as sales.

The profit or loss on disposal is shown in the statement of profit or loss:

A profit on disposal is added as other income.
A loss on disposal is included as an expense.

It is never included in sales revenue — selling a non-current asset is not part of normal trading. (Recording the proceeds as sales would massively overstate revenue and profit — see the Capital & Revenue Income subtopic.)

Only the profit or loss (the difference), not the full proceeds, affects profit; the rest of the proceeds simply represents the asset converting to cash in the statement of financial position.

Profit on disposal = other income; loss on disposal = an expense.
Never include disposal proceeds in sales revenue.
Only the profit/loss affects profit, not the full proceeds.
The rest of the proceeds = the asset turning into cash.

See the full worked example for profit or loss on a sale of a non-current asset →

Quick recap

Profit/(loss) on disposal = proceeds − carrying value (cost − accumulated depreciation).
Profit if proceeds exceed carrying value; loss if below.
It arises because depreciation is an estimate (life/residual value rarely exact).
Part-exchange: the trade-in allowance is the proceeds; the new asset is recorded at full cost.
Shown as profit/loss on disposal in the SOPL — never as sales.
Only the profit/loss, not the full proceeds, affects profit.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

Profit/(loss) on disposal = proceeds − carrying value.
Carrying value = cost − accumulated depreciation at the date of sale.
Part-exchange allowance = proceeds of the old asset; new asset at full cost.
A profit on disposal = depreciated too fast; a loss = too slowly.

How it’s examined

Tested on Paper 1 and Paper 2 through calculating the profit/loss on disposal, part-exchange entries, and interpreting what a profit/loss says about the depreciation estimate (2-6 marks, point-based). The 9706/22 (Feb-Mar 2024) Q2 included a disposal at a stated profit. Examiner reports note candidates using cost (not carrying value) or treating proceeds as sales.

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 — Profit or Loss on a Sale of a Non-Current Asset

Step-by-step solutions to past-paper-style questions on profit or loss on a sale of a non-current asset, written exactly the way a tutor would explain them at the board.

Question type:

1Profit on disposal (3 marks)
Getting startedMulti-step problem• 9706 Paper 1/2 style• disposal, AO2
Question
A machine cost $30,000 and had accumulated depreciation of$ 22,000 at the date of sale. It was sold for $10,500. Calculate the profit or loss on disposal. (3 marks)
Step-by-step solution
1. Step 1
  Carrying value = 30,000 − 22,000 = $8,000.
2. Step 2
  Profit/(loss) = proceeds − carrying value = 10,500 − 8,000.
3. Step 3
  = $2,500 profit on disposal.
Answer
Profit on disposal = $2,500.
Examiner tip
Compare proceeds with carrying value, not with cost.
2Loss on disposal (3 marks)
Getting startedMulti-step problem• disposal, AO2
Question
A vehicle cost $26,000 and had accumulated depreciation of$ 15,000. It was sold for $9,000. Calculate the profit or loss on disposal. (3 marks)
Step-by-step solution
1. Step 1
  Carrying value = 26,000 − 15,000 = $11,000.
2. Step 2
  Proceeds − carrying value = 9,000 − 11,000 = −2,000.
3. Step 3
  = $2,000 loss on disposal.
Answer
Loss on disposal = $2,000.
Examiner tip
Proceeds below carrying value give a loss.
3Depreciate to the date of sale first (5 marks)
Building confidenceMulti-step problem• disposal, AO2
Question
A machine cost $48,000 (bought 1 Jan 2022, 20% straight-line on cost, full year in year of purchase, none in year of disposal). It was sold in 2025 for$ 15,000. Calculate the profit or loss on disposal. (5 marks)
Step-by-step solution
1. Step 1
  Annual depreciation = 20% × 48,000 = 9,600.
2. Step 2
  Years charged: 2022, 2023, 2024 (none in 2025, the year of disposal) = 3 years.
3. Step 3
  Accumulated depreciation = 9,600 × 3 = 28,800; carrying value = 48,000 − 28,800 = 19,200.
4. Step 4
  Profit/(loss) = 15,000 − 19,200 = −$4,200 (loss).
Answer
Loss on disposal = $4,200.
Examiner tip
Apply the depreciation policy to find accumulated depreciation at the date of sale.
4Part-exchange profit (5 marks)
Building confidenceMulti-step problem• part-exchange, AO2
Question
An old vehicle (cost $20,000, accumulated depreciation$ 14,500) is traded in for $6,500 against a new vehicle priced at$ 28,000; the balance is paid by cheque. Calculate (a) the profit or loss on disposal and (b) the cheque paid. (5 marks)
Step-by-step solution
1. Step 1
  Carrying value of old vehicle = 20,000 − 14,500 = 5,500.
2. Step 2
  Trade-in allowance = proceeds = 6,500.
3. Step 3
  (a) Profit on disposal = 6,500 − 5,500 = $1,000.
4. Step 4
  (b) Cheque paid = new cost − trade-in = 28,000 − 6,500 = $21,500.
Answer
(a) Profit $1,000; (b) cheque$ 21,500. New vehicle recorded at full $28,000.
Examiner tip
The trade-in allowance is the proceeds; the new asset goes in at full cost.
5Treatment in the statement of profit or loss (4 marks)
Building confidenceWord problem• treatment, AO2
Question
A business sold a machine for $12,000 (carrying value$ 9,500), recording the whole $12,000 as sales. State the correct treatment and the effect of the error on profit. (4 marks)
Step-by-step solution
1. Step 1
  Correct: only the profit on disposal = 12,000 − 9,500 = 2,500 is income (shown as 'profit on disposal').
2. Step 2
  Recording $12,000 as sales overstates income by 12,000 − 2,500 = 9,500.
3. Step 3
  So profit is overstated by $9,500.
4. Step 4
  The proceeds are not sales — selling a machine is not normal trading.
Answer
Only the $2,500 profit on disposal is income; recording$ 12,000 as sales overstates profit by $9,500.
Examiner tip
Disposal proceeds are never sales; only the profit/loss affects profit.
6Interpret a profit on disposal (4 marks)
StretchWord problem• interpretation, AO3
Question
A business regularly makes profits when it sells its machines. Explain what this suggests about its depreciation policy. (4 marks)
Step-by-step solution
1. Step 1
  A profit on disposal means the proceeds exceed the carrying value.
2. Step 2
  So the asset was depreciated too quickly — its carrying value fell below its actual market value.
3. Step 3
  This suggests the useful life was estimated too short or the residual value too low (the depreciation rate is too high).
4. Step 4
  The business could review its depreciation policy to reflect the assets' actual lives more accurately.
Answer
Regular profits suggest assets are depreciated too quickly (rate too high / life too short); the policy should be reviewed.
Examiner tip
Link the profit to over-depreciation and an over-aggressive policy.
7Net profit/loss on two disposals (5 marks)
StretchMulti-step problem• disposal, AO2
Question
Asset X (cost $18,000, accumulated depreciation$ 13,000) sold for $4,000. Asset Y (cost$ 9,000, accumulated depreciation $6,500) sold for$ 3,200. Calculate the net profit or loss on disposal. (5 marks)
Step-by-step solution
1. Step 1
  X: carrying value 18,000 − 13,000 = 5,000; 4,000 − 5,000 = −1,000 (loss).
2. Step 2
  Y: carrying value 9,000 − 6,500 = 2,500; 3,200 − 2,500 = +700 (profit).
3. Step 3
  Net = −1,000 + 700 = −$300 (net loss).
Answer
Net loss on disposal = $300 (X loss$ 1,000, Y profit $700).
Examiner tip
Calculate each separately, then net the profit and loss.
8Find the proceeds from the profit (4 marks)
StretchMulti-step problem• disposal, AO2
Question
An asset cost $35,000 with accumulated depreciation of$ 29,000 at the date of sale. A profit on disposal of $1,800 was made. Calculate the sale proceeds. (4 marks)
Step-by-step solution
1. Step 1
  Carrying value = 35,000 − 29,000 = 6,000.
2. Step 2
  Proceeds = carrying value + profit = 6,000 + 1,800.
3. Step 3
  = $7,800.
Answer
Sale proceeds = $7,800.
Examiner tip
Rearrange: proceeds = carrying value + profit (or − loss).
9Part-exchange with a loss (5 marks)
StretchMulti-step problem• part-exchange, AO2
Question
An old machine (cost $40,000, accumulated depreciation$ 25,000) is part-exchanged for $11,000 against a new machine costing$ 52,000. Calculate (a) the profit or loss on disposal and (b) the amount paid in cash for the new machine. (5 marks)
Step-by-step solution
1. Step 1
  Carrying value of old machine = 40,000 − 25,000 = 15,000.
2. Step 2
  (a) Profit/(loss) = trade-in 11,000 − 15,000 = −$4,000 (loss).
3. Step 3
  (b) Cash paid = 52,000 − 11,000 = $41,000.
Answer
(a) Loss $4,000; (b) cash paid$ 41,000.
Examiner tip
Trade-in below carrying value gives a loss; new asset still recorded at full cost.
10Significance of disposal results (5 marks)
StretchWord problem• evaluation, AO3
Question
Explain why a profit or loss on disposal does not represent a 'real' gain or expense from trading. (5 marks)
Step-by-step solution
1. Step 1
  Selling a non-current asset is not part of normal trading (not sales of goods/services).
2. Step 2
  The profit/loss only arises because depreciation was based on estimates of useful life and residual value.
3. Step 3
  If those estimates had been perfectly accurate, the carrying value would equal the proceeds and there would be no profit or loss.
4. Step 4
  So the figure is really a correction of the cumulative depreciation estimate, recognised on disposal.
5. Step 5
  It still appears in the statement of profit or loss, but separately from trading results.
Answer
It results from imperfect depreciation estimates, not trading; it corrects the cumulative estimate when the asset is sold.
Examiner tip
The insight: with perfect estimates there would be no profit or loss on disposal.

Model Answers — Profit or Loss on a Sale of a Non-Current Asset

High-scoring sample answers for profit or loss on a sale of a non-current asset 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). A machine cost $44,000 with accumulated depreciation of$ 36,000 at the date of sale. It was sold for $10,000. Calculate the profit or loss on disposal.
Model answer
Carrying value = 44,000 − 36,000 = $8,000. Profit/(loss) = proceeds − carrying value = 10,000 − 8,000 = $2,000 profit.
Why this scores
Marking (point-based, 3). Carrying value $8,000 (1); proceeds − carrying value (1);$ 2,000 profit (1).
Question 2
9706 Paper 2 style3 marks
Q (3 marks). A vehicle cost $32,000 with accumulated depreciation of$ 19,000. It was sold for $10,500. Calculate the profit or loss on disposal.
Model answer
Carrying value = 32,000 − 19,000 = $13,000. Proceeds − carrying value = 10,500 − 13,000 = −$2,500 (loss).
Why this scores
Marking (point-based, 3). Carrying value $13,000 (1); calculation (1);$ 2,500 loss (1).
Question 3
9706 Paper 2 style5 marks
Q (5 marks). A machine cost $60,000 (bought 1 Jan 2022, depreciated at 25% reducing balance, full year in year of purchase, none in year of disposal). It was sold in 2025 for$ 20,000. Calculate the profit or loss on disposal.
Model answer
2022: 25% × 60,000 = 15,000 → CV 45,000.

2023: 25% × 45,000 = 11,250 → CV 33,750.

2024: 25% × 33,750 = 8,437.50 → CV 25,312.50.

2025 (year of disposal): no depreciation.

Carrying value at disposal = $25,312.50. Profit/(loss) = 20,000 − 25,312.50 = −$5,312.50 (loss).
Why this scores
Marking (point-based, 5). Reducing balance each year (3); carrying value $25,312.50 (1); loss$ 5,312.50 (1).
Question 4
9706 Paper 2 style5 marks
Q (5 marks). An old vehicle (cost $24,000, accumulated depreciation$ 17,200) is traded in for $5,500 against a new vehicle costing$ 31,000, with the balance paid by cheque. Calculate (a) the profit or loss on disposal and (b) the cheque paid.
Model answer
(a) Carrying value of old vehicle = 24,000 − 17,200 = 6,800. Profit/(loss) = trade-in − carrying value = 5,500 − 6,800 = −$1,300 (loss).

(b) Cheque paid = new cost − trade-in = 31,000 − 5,500 = $25,500. (The new vehicle is recorded at its full cost of $31,000.)
Why this scores
Marking (point-based, 5). Carrying value $6,800 (1); loss$ 1,300 (2); cheque $25,500 (1); new asset at full cost (1).
Question 5
9706 Paper 2 style5 marks
Q (5 marks). A business sold an old machine for $13,500 (carrying value$ 10,200), recording the whole amount as sales. (a) State the correct treatment of the disposal. (b) Calculate the effect of the error on the reported profit.
Model answer
(a) Selling a non-current asset is not normal trading, so the proceeds are not sales. Only the profit on disposal = 13,500 − 10,200 = $3,300 should be recognised (shown as 'profit on disposal'); the asset and its accumulated depreciation should be removed via the disposal account.

(b) By recording the full $13,500 as sales, income was overstated by 13,500 − 3,300 = $10,200, so profit is overstated by $10,200.
Why this scores
Marking (point-based, 5). Proceeds not sales / only profit on disposal $3,300 (2.5); profit overstated$ 10,200 (2.5).
Question 6
9706 Paper 2/3 style5 marks
Q (5 marks). An asset cost $50,000. At the date of sale its accumulated depreciation was$ 41,000 and a loss on disposal of $1,500 was made. Calculate (a) the carrying value at disposal and (b) the sale proceeds.
Model answer
(a) Carrying value = 50,000 − 41,000 = $9,000.

(b) Proceeds = carrying value − loss = 9,000 − 1,500 = $7,500. (Check: 7,500 − 9,000 = −1,500 loss ✓.)
Why this scores
Marking (point-based, 5). Carrying value $9,000 (2); proceeds = carrying value − loss$ 7,500 (3).
Question 7
9706 Paper 2/3 style6 marks
Q (6 marks). During the year a business disposed of: Machine A (cost $28,000, accumulated depreciation$ 21,000) for $5,000, and Machine B (cost$ 16,000, accumulated depreciation $9,000) for$ 9,500. Calculate the net profit or loss on disposal to be shown in the statement of profit or loss.
Model answer
Machine A: carrying value = 28,000 − 21,000 = 7,000; proceeds − CV = 5,000 − 7,000 = −$2,000 (loss).

Machine B: carrying value = 16,000 − 9,000 = 7,000; proceeds − CV = 9,500 − 7,000 = +$2,500 (profit).

Net = −2,000 + 2,500 = $500 net profit on disposal (shown as other income).
Why this scores
Marking (point-based, 6). Machine A loss $2,000 (2.5); Machine B profit$ 2,500 (2.5); net profit $500 (1).
Question 8
9706 Paper 3 evaluation style6 marks
Q (6 marks). For several years a business has consistently made losses when it sells its delivery vehicles. Discuss what this indicates and what the business might do.
Model answer
What it indicates. A loss on disposal means the proceeds were below the carrying value, so the vehicles were depreciated too slowly — their carrying value remained higher than what they could actually be sold for.

This suggests the depreciation policy is too generous: the useful life was estimated too long and/or the residual value too high, so the depreciation rate is too low.

Consequences. While the assets were held, depreciation was understated, meaning profit was overstated each year; the correction (the loss) is then recognised in a single year on disposal, distorting that year's profit.

What the business might do.

Review and increase the depreciation rate (or shorten the estimated useful life) so the carrying value better reflects the vehicles' actual value.

Consider the reducing balance method, which front-loads depreciation and may suit vehicles better.

Conclusion. Repeated losses on disposal point to an under-aggressive depreciation policy that overstates profit during ownership; the business should revise its estimates so that depreciation more accurately reflects the vehicles' loss of value.
Why this scores
Marking (point-based, ~6). Loss = depreciated too slowly / carrying value too high (~2); policy too generous (life too long / residual too high) (~1.5); profit overstated during ownership (~1); review rate/method (~1.5).
Question 9
9706 Paper 3 style5 marks
Q (5 marks). Explain why a profit or loss on disposal would not arise if depreciation estimates were perfectly accurate.
Model answer
Depreciation spreads the cost less estimated residual value over the estimated useful life. If those estimates were perfectly accurate, the asset's carrying value at the date of sale would exactly equal its sale proceeds (the estimated residual value would equal the actual proceeds at the end of the estimated life).

In that case, proceeds − carrying value = 0, so there would be no profit or loss on disposal.

A profit or loss arises only because the estimates are imperfect — the actual useful life or residual value turned out different from the estimate. The profit or loss is therefore a correction of the cumulative depreciation estimate, recognised when the asset leaves the business. In practice, since the future cannot be predicted exactly, a small profit or loss on disposal is normal.
Why this scores
Marking (point-based, 5). Perfect estimates → carrying value = proceeds (~2); so no profit/loss (~1); profit/loss is a correction for imperfect estimates (~2).
Question 10
9706 Paper 3 style6 marks
Q (6 marks). An old machine (cost $45,000, bought 1 Jan 2022, 20% straight-line, full year in purchase / none in disposal) is part-exchanged in 2025 for$ 9,000 against a new machine costing $60,000, with the balance paid by cheque. Calculate (a) the profit or loss on disposal and (b) the cheque paid.
Model answer
Annual depreciation = 20% × 45,000 = 9,000. Years charged: 2022, 2023, 2024 (none in 2025) = 3 years → accumulated 27,000. Carrying value at disposal = 45,000 − 27,000 = 18,000.

(a) Profit/(loss) = trade-in − carrying value = 9,000 − 18,000 = −$9,000 (loss).

(b) Cheque paid = new cost − trade-in = 60,000 − 9,000 = $51,000. (The new machine is recorded at its full cost of $60,000.)
Why this scores
Marking (point-based, 6). Accumulated depreciation $27,000 (2); carrying value$ 18,000 (1); loss $9,000 (2); cheque$ 51,000 (1).

Key Definitions and Keywords — Profit or Loss on a Sale of a Non-Current Asset

Definitions to memorise and the exact keywords mark schemes credit for profit or loss on a sale of a non-current asset answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Profit/loss on disposal
Examiner keyword
The difference between the proceeds from selling a non-current asset and its carrying value at the date of sale.
Carrying value at disposal
Examiner keyword
Cost less accumulated depreciation up to the date of sale; the figure compared with the proceeds.
Proceeds (disposal)
Examiner keyword
The amount received on disposing of an asset; for a part-exchange, the trade-in allowance acts as the proceeds.
Part-exchange (trade-in)
Examiner keyword
Exchanging an old asset as part-payment for a new one; the trade-in allowance is the proceeds of the old asset, and the new asset is recorded at full cost.
Over/under-depreciation
A profit on disposal indicates over-depreciation (charged too quickly); a loss indicates under-depreciation (too slowly).

Common Mistakes and Misconceptions — Profit or Loss on a Sale of a Non-Current Asset

The traps other students keep falling into on profit or loss on a sale of a non-current asset questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Comparing proceeds with cost instead of carrying value
9706 Examiner Reports
Why it happens
Forgetting to deduct accumulated depreciation.
How to avoid it
Profit/loss = proceeds − CARRYING VALUE (cost − accumulated depreciation), not proceeds − cost.
✕Recording disposal proceeds as sales
9706 Examiner Reports
Why it happens
Cash comes in.
How to avoid it
Only the profit/loss on disposal affects profit (shown separately); the proceeds are never sales revenue.
✕Using the wrong accumulated depreciation at the date of sale
9706 Examiner Reports
Why it happens
Not applying the year-of-disposal policy.
How to avoid it
Compute accumulated depreciation to the date of sale per the stated policy (e.g. none in the year of disposal).
✕Recording the new asset net of the trade-in allowance
9706 Examiner Reports
Why it happens
Treating the trade-in as a cost reduction.
How to avoid it
The new asset is recorded at its FULL cost; the trade-in is the proceeds of the old asset (credited to disposal).
✕Confusing a profit and a loss
9706 Examiner Reports
Why it happens
Not tracking the sign.
How to avoid it
Proceeds ABOVE carrying value = profit; BELOW = loss. State which clearly.
✕Treating a profit on disposal as a trading gain
9706 Examiner Reports
Why it happens
It increases profit.
How to avoid it
It arises from imperfect depreciation estimates, not trading; show it separately from sales.

Profit or Loss on a Sale of a Non-Current Asset

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1Profit on disposal (3 marks)

2Loss on disposal (3 marks)

3Depreciate to the date of sale first (5 marks)

4Part-exchange profit (5 marks)

5Treatment in the statement of profit or loss (4 marks)

6Interpret a profit on disposal (4 marks)

7Net profit/loss on two disposals (5 marks)

8Find the proceeds from the profit (4 marks)

9Part-exchange with a loss (5 marks)

10Significance of disposal results (5 marks)

Profit/loss on disposal

Carrying value at disposal

Proceeds (disposal)

Part-exchange (trade-in)

Over/under-depreciation

✕Comparing proceeds with cost instead of carrying value

✕Recording disposal proceeds as sales

✕Using the wrong accumulated depreciation at the date of sale

✕Recording the new asset net of the trade-in allowance

✕Confusing a profit and a loss

✕Treating a profit on disposal as a trading gain