Audit of PPE Disposals

When a PPE item is sold or scrapped, the auditor should ensure that:

• The disposal was properly authorised.
• Sales proceeds were recorded.
• The asset's cost was removed from the records.
• Accumulated depreciation was removed.
• The gain or loss on disposal was correctly calculated.
• The asset was removed from the PPE register.

Disposal Example

A machine has:

• Cost: RM80,000
• Accumulated depreciation: RM60,000
• Carrying amount: RM20,000
• Selling price: RM25,000

$$\text{Gain on Disposal} = \text{Selling Price} - \text{Carrying Amount}$$ $$= \text{RM25,000} - \text{RM20,000} = \text{RM5,000}$$

The company should record a gain on disposal of RM5,000.