Vernon asked:

I have a limited company. I bought a new truck mid-year for the business, sold the other truck, also used for business, and calculated the annual depreciation on it.

Where and what do I do on the balance sheet asset. The old truck was sold, do I not have to show somewhere how much it was sold for?

Thank you as I am out on my balance sheet by $12,000, sold the old truck for $11,000.

John E. Schmidt answered:

Yes, you need to record the proceeds on sale. The proceeds should be posted to profit or loss on sale. I assume you did not trade in the old truck. I also assume you mean your recorded value after depreciation is $12,000 more than the cost of the new truck.

If so, you need to reduce the asset by the cost of the old one, reduce the depreciation by the amount you have recorded to date, and put the difference to gain or loss on sale. It was probably not appropriate to record full year depreciation on the old truck but then you should record a part year on the new one.

This is the "good accounting" method to record an asset disposal. The Canada Revenue Agency uses a different method.

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