Assets may be discarded, sold, or exchanged due to wear and tear, obsolescence, inadequacy, or damage by fire or other accident.

General accounting steps in a disposal of a plant asset:

·         Record depreciation up to the date of disposal—this also updates Accumulated Depreciation.

·         Remove account balances of the disposed asset—including its Accumulated Depreciation.

·         Record any cash (and/or other assets) received or paid in the disposal.

·         Record any gain or loss resulting from comparing the asset's book value with the market value of any assets received. Exception: in the case of an exchange that lacks commercial substance—discussed in Appendix 10^A.