You must record the disposal of a fixed asset if it becomes obsolete; no longer in use and you wish to write off the asset, or, in cases where you dispose of the asset by selling this on. Recording the disposal essentially removes both the asset cost and the corresponding accumulated depreciation. Any difference will then be recognised as a profit or a loss on disposal.
Navigate to Tools > Fixed Assets.
Note down the type, cost and accumulated depreciation, of the asset you want to remove. Then click on the Archive icon next to it, this will cease any further depreciation entries.
Do not Delete it as this will reverse all the depreciation entries.
Navigate to Settings > Accounting > Account codes.
Click on the Create account code button.
Create a new code called Profit/Loss on disposal of fixed assets. Make sure that the account type is Depreciation. Click on the Save new account button at the bottom.
Navigate to Tools > Journals > All journals.
You will need to create a journal, given the example asset above, the entries will look like so:
7.1. Transfer Accumulated Depreciation to Disposal account - Dr Accumulated Depreciation 50 Cr Disposal 50
7.2. Transfer cost of the asset from Asset to Disposal - Dr Disposal 1000 Cr Asset 1000
7.3. For the proceeds of the sale, you must create an invoice coded to the Disposal account.
Hit the Post journal button to complete.
The above journal will remove the asset and its depreciation from the Fixed Asset account codes and put its net book value to the profit and loss account.
The Profit/ Loss on Disposal account with a Dr balance = Loss, Cr balance = Profit
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