If the renovation is considered a capital expense (e.g., significant improvements that extend the useful life of the building), it is capitalized and depreciated over time. What is the correct journal entry for the disposal of an asset that is not fully depreciated? When disposing of an asset that has not been fully depreciated, they must debit Accumulated Depreciation and Loss on Disposal and credit the Asset account for its original cost. Care should be taken to distinguish capitalizable improvements from non-capitalizable maintenance cost. Normal, regularly recurring repairs and maintenance to keep property in an efficient operating condition should not be capitalized. If the asset is not fully depreciated at the time of write-off, the remaining net book value is recognized as a loss. Below are three scenarios with complete worked examples. First entry was to take the asset off the books; next entry was to remove the loan off the books. I decided to credit depreciation expense instead of a revenue account, since I felt that it was. In this case, if the company discards the asset completely (e.g. asset cannot be sold), it can make the journal entry for the writing off by debiting the accumulated depreciation account and crediting the fixed asset account. No, a fixed asset does not need to be fully depreciated before it can be written off. If the asset still has a remaining book value, that amount becomes a loss when it is removed from the records. However, things get a bit more tricky when the asset has not been fully depreciated or is still in use. This article will walk you through the concept and provide three examples to help you understand the journal entry for such a disposal. Here are the journal entries for writing off fixed assets: 1. Writing Off Fully Depreciated Fixed Assets: When a fully depreciated fixed asset is written off, the accumulated depreciation and the asset cost are removed from the books. There are two categories of building improvements that are undertaken by companies. In this regard, it can be seen that building improvement can either be categorized as routine repairs and maintenance expense, or it can be classified as major structural changes within the organization.