If a church has recorded the acquisition costs for capital assets but chooses not to depreciate (thereby, not being in compliance with FASB 93) how do these capital assets get removed from the books at time of disposal or replacement?
While two wrongs don't make a right, I suppose the ministry here would be required to make a general journal entry reducing capital assets and recording a gain or loss depending on the cash proceeds received, if any.
I recommend that churches that do not need to follow Generally Accepted Accounting Principles use a modified cash basis in which capital asset acquisitions are recorded at the time of purchase as disbursements on a Statement of Receipts and Disbursements. Note that I do not call it an income statement or a statement of activities since it is not consistent with the use of GAAP.
Further, checks written for mortgage payments (both principal and interest) are recorded as disbursements. Only current assets and current liabilities are recorded on the Balance Sheet. Additional disclosures to the ministry should be made regarding the status of long-term debt (e.g., report the beginning mortgage balance, principal payments applied, and ending balance).
While use of the modified cash basis as described here is not GAAP, at least most non-accountants associated with these ministries can understand the budgeting process used in these cases since it very closely relates to "cash in and cash out."