Disposing of fixed assets
Objective: Record asset disposals with gains or losses.
Recommended first: Straight-line depreciation
On disposal: bring depreciation up to date, remove the asset's cost (credit) and its accumulated depreciation (debit), record any proceeds, and record the difference between proceeds and book value as a gain or loss.
Before recording a disposal, bring depreciation up to the disposal date. Then remove the asset at cost and its accumulated depreciation, record the proceeds, and compute the gain or loss as proceeds minus book value. Scrapping an asset with no proceeds produces a loss equal to its remaining book value.
Check your work
- Is depreciation up to date?
- Are both cost and accumulated depreciation removed?
- Does gain or loss equal proceeds minus book value?
A trade-in is a disposal too: the old asset is removed, and the trade-in allowance is treated like proceeds toward the new asset. Exercises in this course state the figures you need.
Cost $6,000, accumulated $3,000 (book value $3,000), sold for $2,600: loss $400.
| Account | Debit | Credit |
|---|---|---|
| Cash | $2,600.00 | |
| Accumulated Depreciation – Equipment | $3,000.00 | |
| Miscellaneous Expense (loss) | $400.00 | |
| Equipment | $6,000.00 |
Common mistakes
✗ Leaving accumulated depreciation on the books after disposal.
✓ Remove both the cost and the contra balance.
Guided practice
Use hints freely here.
Item 1 of 1
Scrap equipment at a loss
On Mar 8, 2026, Silverline Photography sells camera equipment that cost $6,000.00 with accumulated depreciation of $3,000.00 for $2,350.00 cash. Record the sale; record any loss as Miscellaneous Expense.
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Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 2
Sell equipment at a gain
On Mar 6, 2026, FixRight Appliance Repair sells equipment that cost $10,000.00 with accumulated depreciation of $6,000.00 for $4,400.00 cash. Depreciation is up to date. Record the sale. This teaching chart has no separate gain account, so credit any gain to Interest Revenue, its only other-income account.
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References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.