Write off depreciating item

Hi Nick,

In your example, the $1 500 loss would be claimed as Loss on Disposal of Assets. It would be claimed in the Statement of Financial Performance (formerly known as the Profit and Loss Statement). This shows that it is a deduction on revenue account.

In general, any loss on disposal of fixed assets is recorded as a Loss on Disposal of Assets. The loss has to be crystallized by the asset being either sold or scrapped (gotten rid of). The asset cannot be still in use and have a claim made for the diminution of value through damage.

Where an insurance claim is made, the insurance recovery is shown as income. The replacement of the asset is claimed as depreciation, in the same way as the original asset – which is written off, giving rise to the loss on disposal of assets.

Christopher Raynal
Master Accountants Group Limited
PO Box 46018 Herne Bay
Auckland New Zealand
Ph +64 9 360 3259
Fax +64 9 360 2180
http://www.masteraccountants.co.nz

Christopher has been putting some well scripted posts together recently – thank you for your efforts in making “accounting-speak” easy to understand [nice3]

Just as a follow up to the original question;
Let’s say you depreciated an asset (eg, $2,000 A/C) completely over, for example, a 10 year period, but then when you decide to replace it with a new one, you manage to sell the old one for $100.
Is that extra $100 (on top of a cost base of zero) considered a captial gain (and would it therefore attract the 50% reduction) or is it considered a revenue amount for the current financial year?

Many thanks,
Clint