the municipal secretary desktop reference manual - Southwestern ...

When a jurisdiction disposes (sells, trades or throws away) a depreciable fixed asset, one of
three situations will occur:
1. A gain will be made.
2. A loss will be incurred.
3. No gain or loss will occur.
A gain or loss must be recognized in the accounting records.
Whether there is a gain or loss, or neither, depends upon the value received (if any) and the
net book value of the asset disposed.
Value received is simply the amount of cash, notes, trade, or other consideration obtained
from the sale of the asset.
Net book value is the original cost of the asset less depreciation to the date of sale. It is the
assets "value" on the books. It may or may not approximate the actual value of the asset.
A gain occurs when the value received is greater than the net book value.
A loss occurs when the value received is less than the net book value.
There is no gain or loss if the asset is sold or traded at its net book value.
XII-23