A loss on the sale of a depreciable asset occurs when the asset's selling price is less than its book value, reflecting a decrease in the asset's value below what was previously recorded on the company's books.
The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were less than the book value of the asset. When the sale price of an asset is lower than its book value, this difference is recognized as a loss in the company's financial statements. In an inflationary economy, the cost of borrowing is impacted because borrowers can repay the loans with money that is worth less than at the time the loan was taken out due to the decreased purchasing power of money. However, this concept is separate from the transaction involving the sale of a depreciable asset, which is purely an accounting matter.
In conclusion, a loss on the sale of the asset is registered when the selling price is below its recorded book value.