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Is it correct bookkeeping to record the disposal of a fixed asset due?

It is not - remember the key principle or construct in accounting? Historical cost is the principle used in U.S. GAAP (there are a few exceptions). In your case, the write-off amount is the undepreciated value of the asset in question. Say the net book value at time of loss is $1,000, and the cost basis was $3,000 and accumulated depreciation was $2,000, then: DR - Extrordinary Loss on Fixed Assets - $1,000DR - Accumulated Depreciation - $2,000CR - Fixed Assets - $3,000 Furthermore, assume fair market value is $10,000 at time of loss. That number is irrelevant for accounting and reporting purposes. However, this explains why we insure physical assets at their replacement value, not their depreciated accounting value.

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