Asset disposal involves removing the fixed asset and accumulated depreciation from records and accounting for any gain or loss. Journal entries for disposal: Debit Cash (sale price), Credit Fixed Asset Account (original cost), Credit/Debit Accumulated Depreciation (amount accumulated), Credit/Debit Gain or Loss on Disposal (difference). Gain or loss is calculated as: Sale Price - Book Value = Gain (if positive) or Loss (if negative). Book Value = Original Cost - Accumulated Depreciation to date of disposal. If asset is disposed before year-end, depreciation to date of disposal is recorded first. When asset is traded in for new asset, record the trade-in value as cash received and calculate gain/loss. If disposal value is different from residual value assumed initially, it creates gain or loss. Partial year depreciation is calculated from year-start to disposal date. Some assets may be scrapped with no sale value; loss equals book value at disposal date. Journal entry for disposal reverses the asset and accumulated depreciation accounts completely. Gain or loss is recognized in P&L as non-operating item. Disclosure of asset disposals is required in notes to financial statements. Exam tip: Practice creating complete disposal entries with proper dating; understand the mechanics of calculating book value; master the gain/loss formula; show clear workings in exam answers.