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User
jaskhan
Posts: 3
Registered: ‎05-02-2011
United Kingdom
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sale of an asset

Hi there

how do i record the sale of a fixed asset ?

 

Regards

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Ultimate Partner
CathieR
Posts: 933
Registered: ‎30-03-2009
Australia
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Re: sale of an asset

I usually create a new account in the 8-0000s (Other Income).  eg 8-1500 Sale of Asset. (N-T)

I post the amount received to this account and override the N-T with GST, if appropriate to the business.

Then I do a journal to transfer the cost of the asset and the accumulated depreciation to the Sale of Asset Account.  (NB No GST applies here because it is an internal transfer only).  The net effect is the profit (or loss) on sale of the asset.

EXAMPLE:

You buy a trailer 2 years ago for $1,100 (including GST).  So $1,000 should be in your asset account, say account #1-2210

The trailer has been depreciated for two years and the accumulated depreciation is $400.  So you should have an account showing this credit balance, say account #1-2220.

You now sell the trailer for $770 (including GST).

So you post the sale through "Receive Money" to account #8-1500 and change tax code to GST. So $700 is now in that account

You now record a journal entry to remove the asset from the Fixed Asset account.

 

Debit    8-1500   $1000                       Cost of Trailer

Credit  1-2210                 $1000         Trailer Sold

Debit   1-2220    $400                         Trailer Sold

Creidt  8-1500                  $400           Accumulated Depreciation of Trailer

 

The profit on sale of trailer showing in account 8-1500 is $100.

Cathie Robilliard
BCom. (Acc/Finance) UNSW
MYOB Certified Consultant
BAS Agent
email:cathier@optusnet.com.au
Servicing Sydney South, NSW
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User
langymat
Posts: 3
Registered: ‎21-06-2011
Australia
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Re: sale of an asset

Hi

 

I would actually disagree with this way.

In an accrual basis if you have initiated the sale you will have to record an invoice so you cannot record the payment in receive money.

Also it is quite messy recording this transaction in mutliple places.

By entering the payment within receive money you are unable to locate what the payment has being received against as you would of not recorded an invoice.

Here is what I would do:

 

Open a sales invoice change the layout to service choose the supplier you are selling it too.

 

In the first line use the cost account which is the account you used to purchase the asset and type the GST exclusive figure that the asset was purchased for as a gst exclusive figure and use the gst tax code.

on the second line use the acc depn account which is the account used to record depreciation against and put the acc depn amount as a Negative gst exclsuive figure with a gst tax code

On the 3rd line put either the profit or loss you have made on the sale (eg Profit) - use the income account  "profit on sale of asset" and put this figure in, which is sale price less (cost - acc depn) = profit or loss. The total amount in balance due should equal the total amount you have sold the asset for, and the Tax should be balance due divided by 11.

 

If you recap the transaction it should appear like this using an example:

                                      DR                                           CR

Trade Debtors       $10,909.09

Trade Debtors       $1,090.91

Cost                                                                         $9,090.91

ACC depn              $3,000

profit on sale                                                          $4,818.18

gst collected                                                           $1,090.91

 

 

 

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Ultimate Partner
Julie_A_C
Posts: 2,570
Registered: ‎07-09-2010
Australia
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Re: sale of an asset

[ Edited ]

Hi Langymat

 

I am unsure of your qualifications for giving the advice you have given but whether you are on a cash or accruals basis does not mean that you MUST issue an invoice for the sale of the asset.

 

What does decide the decision and what Cathie maybe should have stated was the requirements of the purchaser.  If the purchaser is registered for GST they will WANT a Tax invoice so they can claim back the GST.

 

If you do need to issue a Tax Invoice it will NOT be done as you have stated it will be done with the description of the item, and for the total amount of the sale.

 

If the purchaser is not registered for GST and does not want an invoice for receipt or other purposes the entry can quite easily be done as Cathie has stated or  both entries can be done as one entry via general journal (box ticked for sale and for GST inclusive)

Cr 8-xxxxx sale of capital asset                 $770 GST

Dr 1-xxxxx Bank                 $770                             N-T

Cr  1-xxxx Asset                                           $1000 N-T

Dr  8-xxxx Sale cap asset  $1000                          N-T

Dr  1-xxxx accum dep          $400                           N-T

Cr   8-xxxx Sale cap asset                          $400   N-T

 

If you have a look at your GST reports you will find that whether you are looking at cash or accruals, this sale will be on both.

 

The only other requirement for issuing an invoice if you are on accruals basis would be if the asset is sold on terms and the payment is to be over time and not immediate.

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
ph: 0417 927 654 email: accuratebooks7@gmail.com
Accurate Books Always (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)
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Ultimate Partner
CathieR
Posts: 933
Registered: ‎30-03-2009
Australia
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Re: sale of an asset

[ Edited ]

Hi Langymat

 

Sometimes when posting a complicated answer all aspects are not covered.  My emphasis was on showing how to calculate the profit/loss.

 

Thank you for pointing out that a sales invoice may be raised if the purchaser wants one.  I agree there are circumstances where you would raise one.

 

It does not change my method for posting the profit on sale.

The invoice raised would just be for the sale amount of $770 (per my previous example) , and posted to the 8-1500 Sale of Asset Account (GST).

The purchaser certainly would not be interested in the accumulated depreciation and I am sure businesses would not want to broadcast the profit they have made to their customer on the sale's invoice.

 

 

Julie

Thanks for your comments and input on this one.

Cathie Robilliard
BCom. (Acc/Finance) UNSW
MYOB Certified Consultant
BAS Agent
email:cathier@optusnet.com.au
Servicing Sydney South, NSW
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Contributing User Fan
Contributing User
Fan
Posts: 7
Registered: ‎13-12-2011
United States Minor Outlying I
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Re: sale of an asset

Hi, Mia:

 

I issued an invoice in Sale from 8-XXXX as the buyer required, then how can I record this sale in General Journal to balance the asset, depriciateion?

 

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Ultimate Partner
Julie_A_C
Posts: 2,570
Registered: ‎07-09-2010
Australia
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Re: sale of an asset

Do a general journal entry for the last 4 lines of the entry I mentioned in my previous post:

Cr  1-xxxx Asset                                           $1000 N-T  (original amount of capital item less gst. ie amount showing on balance sheet/depreciation schedule as cost)

Dr  8-xxxx Sale cap asset  $1000                          N-T

Dr  1-xxxx accum dep          $400                           N-T(accumulated depreciation for item showing on balance sheet/depreciation schedule)

Cr   8-xxxx Sale cap asset                          $400   N-T

 

If you don't depreciate monthly and the Accountant wants to make an adjustment for part year depreciation, this can be tidied up in the year end journal entries that are processed.

 

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
ph: 0417 927 654 email: accuratebooks7@gmail.com
Accurate Books Always (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)
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Ema
User
Ema
Posts: 1
Registered: ‎26-06-2012
Australia
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Re: sale of an asset

Hi CathieR,

 

Disagree with you.

Totally agree with Langymat.

The transaction for Accumulated depreciation is looking odd.

Yes, it can be recorded in many different way and finally will be come up with the same result in figurers, but from accounting point it will be is not the best way at all.

 

Dr  Accumulated depreciation P&L  

Cr  Asset cost

Cr Profit on Sale of Fixed Asset

Dr Cash .

 

Ema

BcE, BcA, ACA

 

 

 

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Contributing Cover User
Pistachio
Posts: 13
Registered: ‎21-10-2013
Australia
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Re: sale of an asset

Hi Cathie,

 

I found your post so very helpful, I was totally stuck and then read your post.

 

I am studying for my Cert IV in bookkeeping and was stuck on how to enter a journal for the sale of an asset where an invoice had to be provided.

 

Thank you so much, it all makes sense now :smileyhappy:

 

Pamela

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