CIMA BA3 Syllabus B. RECORDING ACCOUNTING TRANSACTIONS - Profits or losses on disposal in a part exchange - Notes ^{24 / 35}

Instead of receiving sales proceeds as cash, a part exchange allowance could be offered against the cost of a replacement asset:

Dr New asset cost
Cr Disposal account

IAS 16 states that the cost of an item obtained through part exchange is the fair value of the asset received.

The part exchange allowance takes the place of proceeds in the disposals account.