A fixed asset is written off when the Business determined that there is no further use for it, or if the asset is sold off or otherwise disposed of. A write off involves removing the item value from the Balance Sheet so that the related Fixed Asset account and Accumulated Depreciation accounts are reduced.

There are two scenarios under which a Fixed Asset may be written off. The first situation arises when the Business is eliminating the asset without receiving a payment in return. This is a common situation when the item is being scrapped because it is obsolete or no longer in use, and there is no resale market for it. In this case, both the original asset cost and any accumulated depreciation are reversed. If the asset is fully depreciated, that is the extent of the entry.

The second scenario is to write off a Fixed Asset that has not yet been completely depreciated. In this situation, the remaining undepreciated amount of the asset is posted to a loss on Asset disposal expense account. 

In this example, the Business is selling a vehicle 2nd-hand that was originally purchased for $36,000 (Ex GST) and only suffered $5,400 accumulated depreciation.

Write off the Fixed Asset

1. In Xero go to Accounting > Manual journals
2. Click on [New Journal]
   
   è  The New Manual Journal screen opens
   
   
   
   
3. Select/Enter the following details
   • Narration > Type: Motor Vehicle #regoplate or #assetname Write off
   • Date > Type the date of the vehicle has been sold (or disposed of)
   • Amounts are > select No Tax
   • Line 1: Accounts > Select the Asset At Cost #regoplate or #assetname  and post the book value of the Asset At Cost in the Credit column
   • Line 2: Accounts > Select the Asset Acc Depr #regoplate or #assetname account and post the value of the Borrowing Costs in the Debit column
   • Line 3 Accounts >Select the Loss on Asset Disposal expense account and post the journal balance in the Credit column
4. Click on [Post]