What does "profit and loss on disposal" refer to?

"Profit and loss on disposal" specifically refers to the financial outcome realized when an asset is sold or disposed of, which is determined by comparing the income generated from the sale of the asset with its accounting value at the time of disposal. This accounting value, often referred to as the book value, is the asset’s original purchase price minus any accumulated depreciation or impairment losses.

When an asset is sold, if the sales income exceeds its accounting value, the entity realizes a profit. Conversely, if the sales income is less than the accounting value, the entity incurs a loss. This concept is crucial in asset management because it affects the financial statements and can influence decisions regarding the timing and method of asset disposals.

In the context of the other provided options, while they discuss aspects related to disposal or asset management, they do not apply directly to the definition of "profit and loss on disposal." For example, calculating the costs of disposal without accounting for the sale's income and the asset's value would not reflect the financial outcome accurately. Therefore, the option highlighting the difference between the sales income from disposal and the asset's accounting value accurately captures the essence of understanding profit and loss in asset disposal scenarios.