Eliminating accumulated depreciation on disposed asset

Steps:

• Recognize that selling a vehicle requires removing its accumulated depreciation from the books.
• Debit the Provision for Depreciation account to eliminate the balance for the sold vehicle.
• Credit the Disposal of Motor Vehicles account to transfer and close out the depreciation.
• This clears the depreciation without affecting profit directly at this stage.

Why D is correct:

• It represents the standard entry (Debit Provision for Depreciation of Motor Vehicles, Credit Disposal of Motor Vehicles), aligning with IAS 16 rules for derecognizing accumulated depreciation upon asset disposal.

Why the others are wrong:

• A: Reverses the accounts, incorrectly crediting depreciation and debiting disposal.
• B: Wrongly links to income statement, which records gain/loss, not depreciation removal.
• C: Incomplete, omitting the disposal account needed to balance the entry.

Final answer: D