A gain on disposal of asset arises when a company or individual sells an asset for more than its recorded book value on the balance sheet. This gain is typically recorded as other income in the income statement for the period in which the sale occurs. For example, if a company sells equipment that had a book value of $50,000 for $70,000, it realizes a gain on disposal of $20,000. Gains of this type reflect efficient asset utilization or changes in the market value of assets over time.

Companies monitor such transactions as they have tax implications and can affect financial performance reporting. It's important for organizations to account for these gains properly and disclose them in financial statements to meet accounting standards. For individuals managing their financials or businesses doing regular equipment upgrades, tracking gains or losses on asset disposals offers insight into asset efficiency and purchase decisions.