The first entry is always depreciation

Carrying amount is a date-stamped number

An asset's carrying amount is its cost less accumulated depreciation (less any accumulated impairment, Module 3's second half). Because depreciation accrues continuously but is recorded only at period-end, the carrying amount in the ledger is stale on any other day. Before anything can be done with an asset — sold, scrapped, tested for impairment — the depreciation must be brought up to that date. On every disposal question the first entry is a depreciation entry, and it is the step candidates most often skip.

Worked example — Harbourline's delivery truck

Harbourline Logistics Inc. bought a truck on 1 January 2022 for $90,000, with a $10,000 residual value and a five-year life, straight line.

$$\text{Annual depreciation}=\frac{90,000-10,000}{5}=16,000$$

Harbourline decides to sell the truck on 30 September 2025. Accumulated depreciation in the ledger covers the three full years 2022–2024: 3 × 16,000 = 48,000. Nine months of 2025 are still unrecorded:

$$16,000\times \frac{9}{12}=12,000$$

Dr Depreciation Expense                 12,000
    Cr Accumulated Depreciation—Truck           12,000

Now accumulated depreciation is 48,000 + 12,000 = 60,000, and the carrying amount is 90,000 − 60,000 = 30,000. That is the number every disposal computation in L3.2 starts from. Skip the update and you would compare the proceeds with 42,000 instead — and every gain or loss you compute afterwards would be off by exactly 12,000.

Notice what is not in the entry: the Truck account. Depreciation never touches the asset's cost; it accumulates in the contra-asset beside it. The Truck account stays at 90,000 until the disposal entry removes it.

A second asset, to 31 May

Harbourline's forklift: cost $52,000\ast \ast ,residual\ast \ast$4,000, four-year life, bought 1 January 2023, to be traded in on 31 May 2025. Annual depreciation (52,000 − 4,000) ÷ 4 = 12,000. Two full years = 24,000; five months of 2025 = 12,000 × 5/12 = 5,000. Accumulated depreciation 29,000; carrying amount 52,000 − 29,000 = 23,000.

Fully depreciated, still working

Harbourline also runs a van bought for $40,000 with a $4,000 residual whose useful life ended two years ago. It is still on the road. Its accumulated depreciation reached 36,000 — the depreciable amount — and stopped; depreciation stops when the depreciable amount is used up, not when the asset is retired. The van stays on the books at cost 40,000 with accumulated depreciation 36,000, a carrying amount of 4,000 — the residual value — for as long as it is in service. It is not written off, and it is not removed "to tidy the ledger": removing it would understate the cost of assets in use, which the PP&E note discloses. Only a disposal removes it, and when that day comes the entry will be the ordinary one from L3.2, with a carrying amount of 4,000.

The five steps, once

Acquire → depreciate each year-end → update depreciation to the disposal date → remove cost and accumulated depreciation → recognise the gain or loss. L3.2 does the last two.