How to sell a capital asset

This article explains how to record the disposal of a capital asset that your business sells or scraps.

Please note:

  • You only need to follow this process when you scrap or sell a capital asset. When a capital asset depreciates fully by reaching the end of the asset life you selected when you recorded the purchase of the asset, FreeAgent will automatically update your Capital Asset report to reflect this. However, if you then go on to scrap or sell that asset, you’ll need to follow the steps below to record the disposal in FreeAgent.

  • If you’ve previously recorded the disposal of your capital asset in FreeAgent by creating journal entries, there’s no need for you to edit or delete those journal entries unless you want the asset to be removed from the Capital Assets report. If you do, first you’ll need to follow the steps outlined below and then delete the journal entries.

Explaining the money received for the asset

Once the relevant bank transaction has been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you will need to explain it using the appropriate ‘Type’ and ‘Category’ as detailed below.

Select ‘Disposal of Capital Asset’ from the ‘Type’ drop-down menu and select the asset that you’re disposing of from the ‘Disposed asset’ drop-down menu.


Select 'Explain transaction' to complete the process.

What happens next?

The disposal will be recorded in your Capital Assets, Balance Sheet and Profit & Loss reports.

Capital Assets report

In your Capital Assets report, you’ll see a breakdown of the disposal and how much the item had depreciated before you sold or scrapped it.


The figure that’s displayed next to the disposal line item is the asset’s net book value, which is the remaining value that the asset had on the date you disposed of it. FreeAgent calculates this by subtracting the amount by which the asset had depreciated up to the date you disposed of it from the asset’s original value.

Balance Sheet report

In the ‘Capital Assets’ section of your Balance Sheet report, you’ll see a new ‘Disposal’ line entry for the category of asset that you’ve just scrapped or sold.


The Balance Sheet report will also ​​display the amount of depreciation that was posted to the asset category during the period covered by the report.


Profit & Loss report

The total amount you’ve made or lost through the disposal of the capital asset will be displayed in the debit column of the ‘Loss/Gain on Disposal of Capital Asset’ section of your Profit & Loss report


Did you find this article useful?