Asset Disposal
We have provided advice to Councils for the disposal of Council assets to support Capital programmes and capital receipt programmes. These include a number of buildings surplus to requirements many of which have been bought for Housing schemes. A number have also been disposed of to other public bodies including the NHS and DfEE.
The asset disposal may be a result of several events:
- An asset is fully depreciated and must be disposed of.
- An asset is sold because it is no longer useful or needed.
- An asset must be removed from the books due to unforeseen circumstances (e.g., theft).
Here are the options for accounting for the disposal of assets:
- No proceeds, fully depreciated. Debit all accumulated depreciation and credit the fixed asset.
- Loss on sale. 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.
A proper fixed asset disposal is of some importance from the perspective of maintaining a clean balance sheet, so that the recorded balances of fixed assets and accumulated depreciation properly reflect the assets actually owned by a business.