Dispose of an asset
Sell or scrap a whole or part of an asset, see the gain or loss, and have the disposal approved by a second person.
Required permission: asset.manage (propose), asset.approve (approve)
Before you begin
- The asset is Running and has no other change waiting.
- You know the disposal date, whether it was sold or scrapped, the proceeds before tax, and the reason.
- The category has the Disposal proceeds clearing and Gain / loss on disposal accounts.
- The period of the disposal and the months to be depreciated are not locked.
Steps
- Open Fixed Assets > Assets and open the asset.
- Press Disposal.
- Choose How: Sold or Scrapped. A scrapped asset has no proceeds.
- Enter Portion (1 = all). 1 disposes of the whole asset; 0.5 removes half the cost, depreciation and impairment and leaves the asset running. It must be above 0 and up to 1.
- For a sale, enter the Proceeds (before tax).
- Enter the Effective date and the Reason.
- Press Send for approval.
- A different user with asset.approve opens Fixed Assets > Changes to approve and presses Approve.
What happens next
On approval, depreciation is first posted through the disposal month. Then one journal entry clears the asset:
- Debit the disposal proceeds clearing account for the proceeds.
- Debit accumulated depreciation (and accumulated impairment if any).
- Credit asset cost.
- Debit or credit gain or loss on disposal for the difference.
The asset becomes Disposed with a disposal date, its book value is zero and its remaining planned rows are removed. A partial disposal leaves the asset running with the remaining cost, and re-plans the rest of the schedule.
The buyer's invoice is raised in Sales on the disposal clearing account, so the clearing account nets to zero and cash is not booked twice.
Worked examples
Cost AED 1,200.00, depreciation AED 400.00, book value AED 800.00.
| Case | Entry |
|---|---|
| Sold for 900.00 (gain 100.00) | Dr clearing 900.00, Dr accumulated depreciation 400.00; Cr asset cost 1,200.00, Cr gain 100.00 |
| Sold for 600.00 (loss 200.00) | Dr clearing 600.00, Dr accumulated depreciation 400.00, Dr loss 200.00; Cr asset cost 1,200.00 |
| Scrapped (loss 800.00) | Dr accumulated depreciation 400.00, Dr loss 800.00; Cr asset cost 1,200.00 |
| Impaired by 200.00 (book value 600.00), sold for 700.00 | Dr clearing 700.00, Dr accumulated depreciation 400.00, Dr accumulated impairment 200.00; Cr asset cost 1,200.00, Cr gain 100.00 |
| Half disposed, proceeds 500.00 | Removes cost 600.00 and depreciation 200.00 (book 400.00); gain 100.00 |
Good to know
- Scrapping with proceeds is refused: "A scrapped asset has no proceeds; sell it instead."
- The disposal month is depreciated as a whole month and dated at month end. A future effective date is accepted and posts the depreciation for the future months at once, so check the date before sending.
- A proposer cannot approve. If the approver is also the proposer, the approval is refused.
- If depreciation up to the disposal cannot be posted (for example the month is locked), approval is refused with a message beginning "Depreciation up to the disposal could not be posted".
- Check the details before approving. There is no screen to undo an approved disposal.
- Check the effect on Fixed Assets > Reporting > Asset roll-forward.