Journal Entry for Terminal Loss
Journal entry for terminal loss on disposal of Class 10 Computer - Canada
We recently recycled a Class 10 (CCA) computer for our small business. For our T2 tax purposes, we know we are to claim a terminal loss on the disposal ($71.00 of UCC was left on the computer at year end the previous year) if there is only one item left in the Class 10 pool.
My question is, what is the bookkeeping entry in our accounting program that will reflect this terminal loss? Typically at year end we do an entry where the asset ('office equipment-computers') is credited, and the expense ('amortization') is debited.
What would the journal entry at year end be for this loss of $71.00 on that computer hauling it to the recycler for no return, and what accounts are involved in the journal entry?
It looks like you did not have a separate account for accumulated amortization.
What you need to do for accounting purposes, which is different than tax purposes, is prorate your amortization up to the end of the month you recycled it, just like you normally would.
Now your amortization has been booked, you can record your gain or loss on disposal by clearing your "Office Equipment-Computers" (as it appears to be NBV) to an account called Gain (Loss) on Disposal of Asset
. This account should be a "7000" account in your chart of accounts
... i.e. after operating profit.
I have a more complete chat on How to record the sale of an asset
in my article on Common Bookkeeping Entries
... however, you will need to sign up for my free newsletter to get The Insider's Pass
to read this part of the article.
Just remember as you book your accounting entries, which are different than your tax return, your objective is to clear the asset off your books and record your amortization expense allowed for the year.
It is not uncommon for CCPCs to use a non-GAAP method of recording the amortization each year ... which is matching the CCA recorded on the tax return. If this is your case, your objective that I stated above is still the same.
If your bookkeeping entries result in a loss as well, you may want to call the account Terminal Loss on Disposal of Asset
instead of Gain (Loss) on Disposal of Asset
.P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.