How-to · Inventory and assets
How to record the sale of a fixed asset
To record the sale of a fixed asset, debit the bank for the sale price and debit Accumulated Depreciation for the depreciation recorded on it, credit the asset account for its original cost, and put the difference on a gain or loss line. The sale price is not sales income.
How-to guides / Sale of a fixed asset
The accounting behind it
A fixed asset sits on the books at cost, with depreciation built up against it. When you sell it, both have to come off, or your balance sheet keeps showing equipment you no longer own.
The gain or loss is the sale price minus the book value (cost less accumulated depreciation). It goes to other income or other expense, so it doesn't distort your operating results.
Bring depreciation up to the sale date first, so the book value is right.
| Account | Debit | Credit |
|---|---|---|
| Bank | Sale price | |
| Accumulated Depreciation | Depreciation to date | |
| Fixed asset | Original cost | |
| Gain on sale of assets | Price − book value |
Worked example: selling a work truck
A truck cost $40,000.00 and has $28,000.00 of depreciation recorded, so its book value is $12,000.00. You sell it for $15,000.00. The gain is $3,000.00.
If you had sold it for $10,000.00 instead, you would debit a $2,000.00 loss rather than credit a gain.
| Account | Debit | Credit |
|---|---|---|
| Checking | $15,000.00 | |
| Accumulated Depreciation | $28,000.00 | |
| Vehicles | $40,000.00 | |
| Gain on sale of assets | $3,000.00 |
Common mistakes
- Recording the sale price as sales revenue.
- Leaving the asset and its depreciation on the books after the sale.
- Forgetting a loan secured on the asset that the sale paid off.
- Not charging sales tax or GST/HST on the sale when it applies.
In the US and in Canada
United States
For tax, a gain on the sale of equipment (Section 1245 property) is treated as ordinary income up to the depreciation allowed or allowable, often called depreciation recapture (IRS Publication 544). Your tax figures may differ from the books because tax depreciation (MACRS, Section 179, bonus) usually differs from book depreciation.
Canada
For tax, the sale reduces the undepreciated capital cost (UCC) of the asset's CCA class by the lower of the proceeds and the capital cost. If that takes the class below zero, the negative amount is recaptured as income; if the class is left empty with UCC remaining, that remainder is a terminal loss. If you are a GST/HST registrant, the sale of business equipment is generally a taxable supply.
In AcboBooks
The Fixed Assets screen in 0.2.1 tracks cost, depreciation and book value but has no sell or dispose command, so the sale is a journal entry.
AcboBooks 0.2.1 has no separate screen for this, so it is done with a journal entry.
- Bring depreciation up to date. In Accountant → Fixed Assets, open the asset's Schedule and check the Accumulated depreciation. Record the part-year depreciation to the sale date with a journal entry if needed.
- Record the sale. Go to Activities → Make Journal Entry. Debit the bank for the price and Accumulated Depreciation for the total recorded; credit the asset account for its original cost; put the difference on Gain on sale of assets (Other Income) or Loss on sale of assets (Other Expense). Add a GST/HST Payable line if you charged tax. Click Save & Post.
- Pay off any loan. If the buyer's money paid off a loan on the asset, record that payment in Accountant → Loans.
Menu names are from AcboBooks 0.2.1. Not using it yet? Try it free for 15 days, with the sample company to practise on.
Questions
Is the sale of equipment income?
Only the gain is income, and it is other income, not sales. The rest of the price just replaces the asset's book value.
What if the asset is fully depreciated?
Its book value is zero, so the whole sale price is a gain. Still remove the cost and the accumulated depreciation.
Do I charge GST/HST when I sell business equipment?
If you are a registrant and the asset was used in your commercial activities, the sale is generally a taxable supply. Check with the CRA for your case.
Related how-to guides
- How to record an insurance claim payout
- How to reverse a journal entry
- How to record a transfer between bank accounts
Terms used here
Sources
- IRS Publication 544, Sales and Other Dispositions of Assets
- CRA Guide T4002, chapter 6: recapture and terminal loss
Updated October 25, 2026. General bookkeeping information, not tax, legal or accounting advice. Rules differ by state and province and change over time; check with the IRS, the CRA or your accountant for your own situation.
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