How to scrap a capital asset
This article explains how to record the disposal of a capital asset that your business scraps.
Please note:
- You only need to follow this process when you scrap 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.
- 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.
Scrapping an asset when no money is received
If no money is received when you scrap an asset, you can add a manual bank transaction for $0.00 (or other currency) in FreeAgent to show that the asset has been disposed of.
Select ‘Disposal of Capital Asset’ from the ‘Type’ drop-down menu.
Make sure ‘$0.00’ is entered in the ‘Value’ field.
Select the asset that you’re disposing of from the ‘Disposed asset’ drop-down menu and enter a brief description of the disposal in the ‘Description’ field.
Select 'Create and Finish' to complete the process.
The disposal of the scrapped asset will be recorded in your Capital Assets report.
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.