Selling or retiring business equipment: the records accounting needs

Match the equipment to the fixed-asset register, purchase invoice, description, serial number where useful, and legal entity. Record whether it was sold, scrapped, donated, lost, or replaced.

A cash receipt alone does not identify the asset's carrying amount or tax history. Keep the disposal evidence with the original acquisition record.

Provide original cost, relevant additions, depreciation, accumulated depreciation, and any impairment or prior correction. Ask the accountant to verify the carrying amount at the disposal date.

The tax schedule may differ from the book schedule. IRS Publication 946 is a reference for depreciation, while the adviser must assess the specific tax consequences of the disposal.

Record gross sale price, payment dates, selling fees, and any balance still owed. Match received cash to the buyer's documents. If an item was traded in, supply the complete new-purchase and trade-in agreement.

For illustration, equipment with a $4,000 book carrying amount sold for $5,500 with $500 of selling costs has $5,000 of net proceeds in the simplified example. The $1,000 difference may be a book gain under the applicable treatment, while tax results require their own calculation.

For scrapping, loss, or donation, retain the approval, date, condition, and supporting evidence. Insurance receipts may create a separate accounting and tax event.

Do not remove an asset because it is no longer physically visible without investigating its status. Equipment can be offsite, leased to another party, or stored while still owned.

Have the accountant post the approved removal and reconcile the asset schedule to the ledger. Notify operations, insurance, and other owners where the change affects their records.

Retain the sale or disposal evidence and tax review with the year-end package. The final record should explain the removal, proceeds, and resulting book-to-tax differences so a future preparer does not continue depreciating equipment the company no longer owns.