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Disposing Fixed Assets

A fixed asset has a life-cycle. When that life-cycle is ending you should dispose of the asset. There are mainly three reasons for disposing an asset:

  1. The asset has no more value
  2. You have sold the asset
  3. The asset was returned and credited

You dispose of assets in Financials » Fixed Assets & » P71 Fixed Asset List. Select the fixed asset you want to dispose. When the asset is displayed click the link Dispose Asset.

Disposal Methods

The Asset Has No More Value

When the asset has been completely depreciated, the asset should be disposed of if it is not used any more and can't be sold.

However, a fixed asset can lose its value before the depreciations have been completed. For instance, the asset has been replaced and you have no more use for it, or it has been damaged and you are not repairing it. Depending on the state of the asset, you may at such time dispose of the asset by writing its value down to zero. You should consult your accountant to make sure that you can legally do this at such a time. To dispose of an asset in this manner you should

  1. Dispose of the fixed asset using dispose method Write Down Asset. This will write-down the remaining value of the asset to the Fixed Asset Write-Down account which should be the same as the Gain/Loss on Assets account. The write-down will be the loss on the fixed asset.

The Asset is Sold

If you sell your fixed asset, it has no more value to you and you have to dispose of the asset. The sale of the asset itself should be entered as a sales order, a sales receipt or a journal entry. There may be special tax implications on the sale of the fixed asset and you should consult your accountant on how to post such a transaction. When you have posted the sale, as well as the gain or loss, you should dispose of the fixed asset. To dispose of a fixed asset in this manner you should:

  1. Enter the sales transaction as a sales receipt, a sales order/invoice or a journal entry. Post the sales value against a Gain/Loss on Assets account. If you use a sales order with an item, you should link that item to such an account in field Sales Account.
  2. Dispose of the fixed asset using dispose method Write Down Asset. This will write-down the remaining value of the asset to the Fixed Asset Write-Down account which should be the same as the Gain/Loss on Assets account, or they can be two different accounts using the same parent account. The net value of the sale and the write-down will be the gain or loss on the fixed asset.

The Fixed Asset Has Been Returned and Credited

If you have returned the fixed asset to the supplier and the supplier has given you credit, you should also dispose of the fixed asset. When this happens, any depreciations that have taken place will be voided, as if the fixed asset never existed.

It is important that you first do a normal supplier credit to enter the credit of the fixed asset before you dispose of it. When a fixed asset has been credited you should

  1. Enter the supplier credit for the fixed asset.
  2. Dispose of the fixed asset using dispose method Asset Credited.