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The asset disposal results in a direct effect on the company's financial statements. In all scenarios, this affects the balance sheet by removing a capital asset. Also, if a company disposes of assets by selling with gain or loss, the gain and loss should be reported on the income statement.

A disposal account is a gain or loss account that appears in the income statement, and in which is recorded the difference between the disposal proceeds and the net carrying amount of the fixed asset being disposed of.

Asset disposal, also called de-recognition, is the removal of a long-term asset from a company's financial records. If there is a difference between disposal proceeds and carrying value, a disposal gain or loss occurs.

When your company sells off an asset or investment, any gain on the sale should be reported on your income statement, the financial statement that tracks the flow of money into and out of your business. However, because of the circumstances under which you received this money, the gain should not be counted as revenue.

If instead of selling for $5,500, it sold for $3,000, giving you a $1,500 loss, you present the loss on asset disposal on the income statement as a negative. It is subtracted from other income. You will have to record the sale on your cash-flow statement and your balance sheet as well.

The most common types of non-operating expenses are interest charges or other costs of borrowing and losses on the disposal of assets.

When there is a gain on the sale of a fixed asset, debit cash for the amount received, debit all accumulated depreciation, credit the fixed asset, and credit the gain on sale of asset account.