Asset Removal

Debit cash for the amount received, debit all accumulated depreciation, debit the loss on sale of asset account, and credit the fixed asset. Gain on sale. Debit cash for the amount received, debit all accumulated depreciation, credit the fixed asset, and credit the gain on sale of asset account.

Derecognition of an asset occurs whenever an asset is disposed of or is not expected to provide any future benefits from either its use or disposal. As a result, the asset is removed from the financial statements. Disposal of a long-lived operating asset is effected by selling it, exchanging it, or abandoning it.

You can scrap an asset anytime using the "Scrap Asset" button in the Asset record. You will be asked for confirmation, click on Yes and the asset will be scrapped. The "Gain/Loss Account on Asset Disposal" account mentioned in the Company is debited by the Current Value (After Depreciation) of the asset.

Disposal of an Asset The machine's book value or disposal value can be calculated by subtracting from original cost, its depreciated cost. For instance, the depreciation value of machine at time of sale is $4000, means its book value is $1000. The company will try to sell the machine at least at its book value.

The entry to remove the asset and its contra account off the balance sheet involves decreasing (crediting) the asset's account by its cost and decreasing (crediting) the accumulated depreciation account by its account balance.

The scrap value can also be used to calculate the depreciation expense. Using our example above, if the company estimated a $3,000 residual value for the machinery at the end of 8 years, then it can calculate its depreciation expense per year to be ($75,000 - $3,000) / 8 = $9,000.

When a fixed asset is eventually disposed of, the event should be recorded by debiting the accumulated depreciation account for the full amount depreciated, crediting the fixed asset account for its full recorded cost, and using a gain or loss account to record any remaining difference.

Another way to write-off the asset is providing for a reduction in carrying value of the asset. This amount is usually charged to expense as it is considered as the cost of doing business. The term writes off refers to the value of the asset, the amount is written off and not the asset itself.

Write off an asset when it is determined that it is no longer useful. The journal entry is as follows: Credit (asset to be written off), Debit (accumulated depreciation), and Debit (loss on disposal).