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April 21, 2006

What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business?

An asset that is fully depreciated and continues to be used in the business will be reported on the balance sheet at its cost along with its accumulated depreciation. There will be no depreciation expense recorded after the asset is fully depreciated. No entry is required until the asset is disposed of through retirement, sale, salvage, etc.

To illustrate this, let’s assume that a machine with a cost of $100,000 was expected to have a useful life of five years and no salvage value. The company depreciated the asset at the rate of $20,000 per year for five years. If the machine is used for three more years, the depreciation expense will be $-0- in each of those three years. During those three years, the balance sheet will report its cost of $100,000 and its accumulated depreciation of $100,000 for a book value of $-0-.

Learn more about Depreciation.

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Comments

11 Responses to “What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business?”

  1. abul_muth on February 17th, 2007 10:11 am

    accounting treatment of insurance claim

  2. merna refaat mahmoud on November 13th, 2007 1:47 pm

    iam a company having a car used for transportation,it costs me 100,000 L.E and its estimated useful life is 5 years then after the 5 years passes its book value will be zero,its accumulated depreciation will be zero also,and on the other hand i still have cost for this car”gas -repair” what is the right accounting treatment for it

  3. ASIF on April 17th, 2008 10:17 am

    according to ur illustration,
    if assets after useful life be reported as 100000 in balance sheet and accumulated dep 100000 in balance sheet
    my Q is ‘the assets and dep will be 100000 for the whole life of business or we will expense out the accum. dep
    (we may make its market value and then charge depriciation)

  4. senthil on May 26th, 2008 7:05 am

    dear sir

    we are a public sector unit and fire occured in our board room and incurred a loss of Rs.40 lacs. Insurance claim is pending and how do we treat in our books of accounts.
    is there any provision entry for claims to be received
    thanks
    senthil

  5. adeel on June 27th, 2008 9:06 am

    i want to be member of the accounting coach

  6. Surajit on July 7th, 2008 12:05 pm

    Dear Sir,

    What is accounting treatment of cost of insurance on fixed assets? Do we capitalize the expense?

  7. sanjeev on November 17th, 2008 1:48 pm

    sir,
    2nd hand machine purchased and some money spended on repair . what is its treatment in machine account.
    thanks.

  8. Maku on February 9th, 2009 5:19 am

    How do you treat the expenses incurred repairing an accident damaged vehicles

  9. sherly on February 25th, 2009 11:38 pm

    what is the proper calculation of account receivable turnover?how is the proper calculation of cost ratio?calculation for inventory fire loss?

  10. Lenine on August 12th, 2009 2:38 am

    I very satisfy with your web site which provided a lot of sources involving in Accounting. I very thank you. Now I get more knowledge about.

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    Hope to see your reply soon.

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  11. Rob on October 29th, 2009 3:07 pm

    Dear sir,

    Combining management accounting and financial accounting in this question:

    I have a plant using many old machines which are fully written off. In the P&L I do not have any depreciation charges. However I now see in the routings and the machine costs that a fictive amount of depreciation is included.
    This means that the valuation of finished goods includes this fictive / not realistic depreciation amount. The inventory is valuated for a too high amount.

    How do I need to handle this situation - shoiuld the inventory be adjusted downwards?

    This would also be a liitle bit strange as, in case we would do a new investment, the stock would increase again…

    Kind regards,

    Rob

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