During use, many assets acquired by a company tends to depreciate over time. The asset steadily loses a bit of its value, year after year. This loss is reflected in accounting as accumulated depreciation, but there comes a time when the asset is no longer useful and requires retirement. The asset at that point may or may not have value remaining. To balance the books when retiring an asset, both the accumulated depreciation value, as well as the total and remaining value of the asset, must be accounted for in the general ledger, all within a single entry.
Things You Will Need
Check the records for the asset to determine how much depreciation the asset has had charged against its value. If there is remaining value on the asset, you’ll need to account for both the remaining worth as well as the depreciation in order to retire the asset.
Record an asset with no remaining value due to depreciation in the general ledger by debiting the entire value from the asset’s accumulation depreciation account, and then crediting the value under the asset name. For example, a piece of machinery with depreciation already charged against it for the total value of $100,000 would have a dual entry with the first line reading, ”Accumulated Depreciation — Machinery” and $100,000 placed in the debit column. Fill the line directly under it with an indented entry reading, “Machinery” with $100,000 placed in the credit column. Date all journal entries.
Record an asset with some remaining value by debiting both the accumulated depreciation and the loss of the remaining value due to the retirement of the asset. For a piece of machinery with a total value of $100,000 and depreciation of $80,000, record the entry in the ledger on three lines. Date the entry in the general ledger next to the first line. Place “Accumulated Depreciation — Machinery” with $80,000 in the debit column on the first line, then place “Loss on Retirement of Machinery,” with $20,000 in the debit column on the second line. Indent the third line and write, ”Machinery” $100,000, with the $100,000 value of the machinery placed in the credit column..
Subtract the amount of the depreciation for all entries from the accumulated depreciation account, and then increase the disposal expense account with the remaining value of the asset, if any.