Non-current asset entries must show how an asset’s recorded amount changes over time. Accurate ledger postings keep the asset account, accumulated depreciation, and any profit or loss on disposal correctly stated.

Core ledger accounts used

Non-current assets are usually recorded through several linked accounts rather than one single entry. The main accounts are:

• the non-current asset account, which records the asset at cost or revised valuation

• the accumulated depreciation account or provision for depreciation account, which stores total depreciation charged to date

• the disposal account, used when an asset is sold, scrapped, or traded in

• the revaluation reserve, used when a revaluation gain is recognized

The carrying amount is the amount of the asset remaining after deducting depreciation already charged.

This figure is needed before any revaluation or disposal entry is recorded.

Acquisition of a non-current asset

When a business acquires a non-current asset, the asset account is debited because the business now controls an additional asset. The account credited depends on how the purchase is financed.

• If paid immediately in cash or by bank:

  • Debit non-current asset account

  • Credit bank or cash

• If bought on credit:

  • Debit non-current asset account

  • Credit payable or supplier

The amount debited should include the full cost of bringing the asset into use, such as delivery, installation, and other directly attributable costs. These costs form part of the acquisition entry rather than ordinary operating expenses.

A journal entry is often prepared first and then posted to the ledger accounts. The narration should clearly identify the asset acquired and the date of purchase.

Revaluation entries

If a non-current asset is revalued, the ledger entries must adjust the asset from its current carrying amount to the new valuation. In many accounting questions, any accumulated depreciation relating to that asset is first transferred out of the provision for depreciation account and back to the asset account. This leaves the asset account at carrying amount before the revaluation change is recorded.

When the revaluation is an increase:

• Debit non-current asset account

• Credit revaluation reserve

When the revaluation is a decrease:

• Debit revaluation reserve, if there is an existing surplus relating to that asset

• any remaining decrease is debited to profit or loss

• Credit non-current asset account

The key point is that the ledger must show both the revised asset value and the correct reserve movement. Revaluation does not use the disposal account because the asset is still owned by the business.

Depreciation entries

Depreciation is recorded periodically to allocate the cost or valuation of the asset over its useful life. The usual ledger entry is:

A worked example of journal entries posted into T-accounts, including a clearly labeled accumulated depreciation T-account. It illustrates the standard posting logic: depreciation expense is debited while accumulated depreciation is credited, increasing the contra-asset balance over time. This makes the separation between original cost and total depreciation charged easier to visualise. Source

• Debit depreciation expense

• Credit accumulated depreciation account

This keeps the original asset cost separate from the total depreciation charged to date. In exam questions, the account may be called provision for depreciation rather than accumulated depreciation, but the double entry is the same in principle.

Where a full journal is required, the journal entry records the depreciation charge for the period, and the ledger posting updates both the expense account and the relevant provision for depreciation account. The balance on the provision for depreciation account is then used when calculating carrying amount or preparing for disposal.

Disposal of a non-current asset

When a non-current asset is disposed of, several entries are needed because the business must remove both the asset’s recorded cost and its accumulated depreciation. A disposal account is commonly used to collect these entries and reveal the profit or loss.

The normal sequence is:

• transfer the asset’s cost:

  • Debit disposal account

  • Credit non-current asset account

• transfer the accumulated depreciation:

  • Debit accumulated depreciation account

  • Credit disposal account

• record the proceeds received:

  • Debit bank, cash, or receivables

  • Credit disposal account

After these postings, the balance remaining on the disposal account is transferred:

• credit balance on disposal account = profit on disposal

• debit balance on disposal account = loss on disposal

To close the disposal account:

• for a profit:

  • Debit disposal account

  • Credit profit on disposal or profit or loss

• for a loss:

  • Debit profit or loss

  • Credit disposal account

The disposal account is therefore a working account that gathers all related entries before the final result is transferred.

Part exchange entries

A part exchange happens when an old asset is given in as part payment for a new asset. The accounting treatment combines an acquisition and a disposal.

The old asset is disposed of in the usual way through the disposal account. The amount allowed by the supplier for the old asset is treated as the proceeds of disposal, even though cash is not received directly.

The new asset must be recorded at its full cost, not just the cash difference paid. The entries usually include:

• Debit new non-current asset account with the full price of the new asset

• Credit bank or payable with the cash balance due

• Credit disposal account with the part exchange allowance for the old asset

Any remaining balance on the disposal account is then transferred as a profit or loss on disposal. This ensures that the old asset is fully removed from the books and the new asset is recorded correctly.

Checks for accurate ledger postings

Common mistakes in this area include:

• failing to transfer accumulated depreciation when an asset is disposed of

• recording only the net cash paid in a part exchange instead of the full cost of the new asset

• posting revaluation increases to profit or loss instead of the revaluation reserve

• leaving a balance on the disposal account after the profit or loss entry has been made

• using the wrong asset category account when several classes of non-current assets are maintained

Each ledger entry should remove or update the old balances completely, so the remaining accounts represent only assets still held by the business.