How do you record selling a fixed asset before it is fully depreciated?

Depreciation runs until the asset leaves.

The guides that rank for this question get the entry right. AccountingToolssells a 100,000 machine after exactly seven years, with 70,000 of depreciation already booked, and shows the gain at 35,000 and the loss at 25,000. A sale on a year end is the easy case. Most sales happen on an ordinary Tuesday in August, when the register still shows last year’s figure. principlesofaccounting.com gives the rule in one line: update depreciation through the date of disposal, then record it. This article puts numbers on what happens when that line is skipped.

The rule comes straight from IAS 16. Paragraph 55 says depreciation stops when the asset is derecognised (or earlier, if it is classified as held for sale), so it keeps running right up to the sale. Paragraph 67 derecognises the asset on disposal. Paragraph 71 measures the gain or loss as net disposal proceeds less the carrying amount, and paragraph 68 puts it in profit or loss, adding that “gains shall not be classified as revenue.”

One server rack, sold in August.

Take an example SaaS company that moves its last on-premise servers to the cloud and sells the rack. Its books run on a calendar year in US dollars.

The company’s policy gives the month of sale a full month of depreciation. Some companies give it half a month or none. Any of those is fine if it is written down and applied every time.

19 August 2026, sale of server rack

                                     Dr        Cr
Cash                             38,000
Accumulated depreciation         50,750
  Equipment at cost                        84,000
  Gain on disposal of equipment             4,750
                                 ------    ------
                                 88,750    88,750

Before this entry: depreciation for every month
up to and including August is already posted,
so accumulated depreciation reads 50,750.

Three ways to book the same sale.

Here is the same sale booked the right way and two common ways it goes wrong. The first happens at companies that book depreciation once a year: someone records the sale against the accumulated depreciation in last year’s register. The second happens at companies that run depreciation monthly from a spreadsheet: the sale is entered on 19 August before the August run, and nobody takes the asset off the schedule.

The year-end version gets total profit right and still tells the wrong story. The 14,000 of depreciation for January to August never appears as depreciation. It turns up inside a 9,250 loss on a sale that actually made 4,750. If your EBITDA adds back depreciation but does not strip out disposal gains and losses, EBITDA for the year is 14,000 too low, and anyone reading the board pack will ask why you sold the rack at a loss.

The spreadsheet version is worse because it keeps going. The sale is recorded at a 3,000 gain against July’s accumulated depreciation of 49,000. The schedule then runs August to December on an asset the company no longer owns: 8,750 of extra depreciation, and an 8,750 credit left in accumulated depreciation with no cost behind it. It sits there until an auditor tries to tie the register to the ledger.

A disposal check for the close.

• Depreciation is posted through the month of disposal under your written policy, before the disposal entry is made.
• The asset is marked disposed in the register, so next month’s run cannot pick it up again.
• Cost and accumulated depreciation both leave in the same entry. Your fixed asset rollforward (opening, additions, disposals, depreciation, closing) still ties to the ledger for both.
• Proceeds show in investing cash flows. Under the indirect method the gain is taken back out of operating cash flow, and a loss is added back.
• If the buyer pays later, the entry debits a receivable, not cash. IAS 16 paragraph 72 records deferred payment at the cash price equivalent, with the rest as interest over the credit period.

How Rivane records a disposal today.

In Rivane you dispose of an asset from the fixed asset register. You enter the date and the proceeds, and the dialog shows the projected impact before you confirm: book value at disposal, the catch-up depreciation it will book, the proceeds, and the gain or loss. For the server rack after a July run, that panel would show 1,750 of catch-up depreciation, a book value of 33,250 and a gain of 4,750.

# Rivane fixed asset disposal, as built.

preview       before anything posts, shows book value
              at the disposal date, the catch-up
              depreciation still to book, proceeds,
              and the gain or loss
catch-up      on confirm, posts each missing monthly
              depreciation entry from the last run
              through the month of disposal, through
              the same path as the monthly run
lock check    refuses a disposal dated in a locked
              period, and refuses rather than skips
              if any catch-up month is locked
entry         Dr accumulated depreciation, Cr cost,
              Dr cash for proceeds, gain or loss as
              the balancing line; created and posted
              in one step, one posting key per asset
              and date, so a retry cannot book twice
cash          proceeds go to the cash account of the
              entity's default bank account and are
              tagged as investing cash flow; with no
              linked bank account it stops with an
              error rather than guess an account
after         the asset is marked Disposed and drops
              out of the monthly depreciation run

The limits worth knowing. A disposal removes the whole asset; selling part of one is not supported yet. Proceeds always post to cash, so a sale on credit or a trade-in needs a follow-up journal to move the amount to a receivable or to the new asset. The month of disposal gets its normal monthly charge, so if your policy gives it half a month or none, adjust the catch-up entry. Each asset is held in a single currency.

The short version.

Bring depreciation up to the sale under one written policy. Take cost and accumulated depreciation off together, record the proceeds, and let the gain or loss balance the entry. Mark the asset disposed so nothing depreciates it again. In the example, that turned a reported 9,250 loss into the 4,750 gain the company actually made.

To see how Rivane keeps the register, depreciation runs and disposals in one ledger, read the Rivane fixed assets overview.

Sources

• IFRS Foundation, IAS 16 Property, Plant and Equipment. Paragraph 55: depreciation stops at the earlier of classification as held for sale and derecognition. Paragraph 67: derecognise on disposal. Paragraph 68: the gain or loss goes to profit or loss, and gains are not revenue. Paragraph 71: gain or loss is net disposal proceeds less carrying amount. Paragraph 72: deferred payment is recognised at the cash price equivalent.
• AccountingTools, Fixed asset disposal accounting, 22 May 2026. Read as a current answer: a 100,000 machine sold after exactly seven years with 70,000 of depreciation, for 35,000 (a 5,000 gain) or 25,000 (a 5,000 loss).
• principlesofaccounting.com, Disposal of PP&E. Read as a current answer: update depreciation calculations through the date of disposal, then record the disposal.

A note on how this was researched. The IAS 16 paragraphs were read directly from a consolidated copy of the standard. That copy is an earlier edition; the paragraphs cited here make the same points in the current text, where paragraph 68 now points to IFRS 16 for sale and leaseback. Both guides were read in full. The company, the asset and every amount are examples. The Rivane section describes the product as built today, checked against the fixed assets code rather than marketing copy. This is not accounting advice for your specific case.

On embedded social posts: we looked for public posts from standard setters or practitioners on asset disposals and found none we could verify as current and relevant, so this article uses ordinary citations instead.