You show the loan because it still is owed, no matter the situation for the asset. Example:

Asset basis $100,000

Depreciation -$100,000 <== this is offset to Expense, so it affects the P&L, as Net Income which is part of Equity

Debt balance $85,000 <== pretending there was $15,000 downpayment

Equity $15,000 (from the downpayment) + $85,000 (the loan balance) + negative net income $100,000 (the Expense entry)

Assets = Liab + Equity

$100,000 - $100,000 = $0 asset

And Equity (which also is called Net Assets) = $0

That's in balance.