FA – May 2014 – L1 – SA – Q18 – Accounting Concepts

This question tests knowledge of the accounting entries for recording scrapped containers in container trading accounts.

Question

In accounting for Containers using container trading account method, the necessary accounting entries to record scrapped containers are ………………….

Answer

Dr. Container Trading Account Cr. Container Inventory Account

Explanation: When containers are scrapped in the container trading account method, the entry removes the scrapped containers from the inventory. The Container Trading Account is debited to record the loss, while the Container Inventory Account is credited to reduce the asset value. This entry reflects the disposal of the containers and the associated reduction in the company’s assets.

Tags: Asset Disposal, Container Accounting, Journal Entries
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2014

Uploader: Theophilus