Journal Entry for Stolen Fixed Assets
Stolen fixed assets are the company fixed assets that are lost due to the thief. The company has to remove the fixed assets from the financial statement as they no longer exist.
Fixed assets are the property that are under the company’s control and expect to use for more than a year. When the company purchases fixed assets, it will record them on the balance sheet as non-current assets.
The fixed assets will reduce the value through depreciation. The management team will estimate the expected useful life of the assets and makes depreciation expenses. The cost of fixed assets will be allocated to expenses over the useful life. The amount of depreciation will depend on the depreciation method as well.
The depreciation will increase the expense on income statement and the accumulated depreciation which will reduce the net book value. The accumulated depreciation is the contra account of the cost of fixed assets.
The fixed assets value present on the balance sheet will depend on the cost and accumulated depreciation. The total of both accounts is the fixed assets net book value. It means that each asset has two accounts on the balance sheet which include cost and the accumulated depreciation.
The physical fixed assets can be lost due to the accident or the thief. These assets have not yet reached the end of their useful life. The company has to remove them from the balance sheet if they are stolen.
To remove the assets, they have to remove both the cost and accumulated depreciation of the assets. Most of the time, the asset’s cost will be bigger than accumulated depreciation as the assets are not yet reached the end of their useful life.
The net book value will be reversed to the expense on the income statement and it will reduce the company’s net profit.
Journal Entry for Stolen Fixed Assets
When the fixed assets are stolen, the company has to remove them from the balance sheet. To remove the fixed asset, we need to remove both cost and accumulated depreciation of assets.
The journal entry is debiting accumulated depreciation, Loss by theft, and credit cost of assets.
| Account | Debit | Credit |
|---|---|---|
| Fixed Assets Loss by theft | XXX | |
| Accumulated Depreciation | XXX | |
| Fixed Assets Cost | XXX |
The entry will remove both cost and accumulated depreciation of the assets. The loss by theft is the balancing figure which will be recorded as the expense on income statement. It is equal to the fixed assets’ net book value.
Example
Company ABC owns a car that cost $ 30,000 and it has been depreciating for a few years. The car’s accumulated depreciation amount is $ 20,000. During the month, the car was stolen from the company. Please prepare the journal entry for the fixed assets stolen.
The car was stolen from the company, so they have to remove it from the balance sheet. The asset is no longer under the company’s control.
First, we need to calculate the fixed asset’s net book value when it was stolen.
Net book value = Cost – Accumulated Depreciation = $ 30,000 – $ 20,000 = $ 10,000
The journal entry is debiting accumulated depreciation $ 20,000, Fixed assets lost by theft $ 10,000, and credit fixed assets cost $ 30,000.
| Account | Debit | Credit |
|---|---|---|
| Fixed Assets Loss by theft | 10,000 | |
| Accumulated Depreciation | 20,000 | |
| Fixed Assets Cost | 30,000 |