Examples of Fixed Assets
Fixed asset disposals refer to the act of getting rid of a fixed asset from a company’s balance sheet. This typically occurs when an asset is fully depreciated, no longer usable, or no longer needed. Disposals can take place in several ways:
- Sales: The company can sell the asset to another entity. This is common for assets that still have some use left in them but are no longer needed by the company, like machinery, vehicles, or buildings.
- Trades: The company can trade the asset in as part of the purchase of a new asset. For example, a company might trade in an old company vehicle when purchasing a new one.
- Retirements: If an asset is fully depreciated and no longer usable, the company might simply retire it. This typically involves physically disposing of the asset, like junking an old machine or demolishing a building, and removing it from the company’s fixed asset register.
- Loss or Destruction: If an asset is lost, stolen, or destroyed (for example, in a fire or natural disaster), it would also need to be disposed of from the company’s balance sheet.
In all of these cases, the company needs to account for the disposal properly. This involves removing the asset’s cost and the associated accumulated depreciation from the balance sheet, and recognizing any gain or loss on the disposal. The gain or loss is determined by comparing the proceeds (if any) from the disposal with the asset’s book value (its original cost minus accumulated depreciation) at the time of disposal.