Glossary
What is asset disposal?
What happens in the books when a machine or vehicle is sold or scrapped, and how the gain or loss on disposal is worked out.
Updated
In short
Asset disposal takes a fixed asset out of the books when it is sold, scrapped or lost, with a gain or loss against book value. SimpleERP's Dispose action posts that journal and shows the result first.
Asset disposal is the removal of a fixed asset from the books when it is sold, scrapped, lost or given away. The asset's cost and its accumulated depreciation are both taken out, the money received is recorded, and the difference between that money and the book value is a gain or a loss on disposal, shown in the profit and loss statement.
Asset disposal: a worked example
On 15 October 2026 Lakshmi Steel Furnitures sells its old welding machine (AST-0001) for ₹60,000. It cost ₹1,20,000 and depreciation of ₹70,000 has been posted to date, so its book value is ₹50,000 and the gain is ₹10,000.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 15 Oct 2026 | Bank (HDFC) | ₹60,000 | |
| 15 Oct 2026 | Accumulated Depreciation | ₹70,000 | |
| 15 Oct 2026 | Fixed Assets | ₹1,20,000 | |
| 15 Oct 2026 | Gain / Loss on Asset Disposal | ₹10,000 | |
| Total | ₹1,30,000 | ₹1,30,000 |
FAQ
Questions, answered
How is the gain or loss on disposal calculated?
Gain or loss equals the money received less the book value, where book value is cost less accumulated depreciation. Sell above book value and it is a gain; below, a loss. Post depreciation up to the disposal month first so the book value is current.
What is the difference between disposal and write-off?
A disposal usually brings in some money, such as a sale or scrap value. A write-off is a disposal with nothing received, so the whole remaining book value becomes a loss. SimpleERP has both actions on the asset.
Does disposal affect depreciation for tax?
Income tax depreciation in India works on blocks of assets, and sale proceeds reduce the block's written down value. That calculation differs from the book entry, so your CA works out tax depreciation separately from the books.
Can I undo a disposal in SimpleERP?
Posted entries are not edited. Reverse the disposal journal in Accounting if the period is still open, then correct the asset with your accountant. Disposal also closes the asset's open allocation, so reassign the holder if it comes back.
Related
Keep reading
Fixed asset register
The list of every long-term asset with cost, date, depreciation, book value and who holds it.
Read moreWrite-off
Removing an asset's value from the books when it is lost, worthless or uncollectible, and charging it to profit.
Read moreFixed assets
An asset register with monthly depreciation, custodians, maintenance and disposal.
Read more
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