cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Frequent Explorer ***

Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

Hello, 

 

I would need help to record the loss on disposal for a Fixed Asset that was set up .

 

The issues is that the business operated on Cash Basis and the Balance sheet / Income Statement somehow do not record the Accumulated depreciation . 

 

I need to create Journal entries instead and need help on how to enter it to be reflected correctly across .  

 

Would I need to create a Loss on disposal Account and categorize it as an Income account

or a Expense Account  or link the Loss on Disposal back to Fixed Assets . 

 

Any help would be appreciated . Thank you. 

 

Cost
12/2/2015 
4,173.00                         

 

Current Accumulated Depreciation
12/31/2017
3,771.62

 

Reversal of depreciation (Jan 1, 2018 to Dec 31, 2018)
137.62

 

Loss on disposal   12/31/2018
539.00

 

_________________________________________________

 

1520 - Computer & Office Equipment                                                                                        4,173.00  CR
1521 - Less-Accumulated Depreciation: Computer & Office Equipment                        3,634.00      DB
 
 
 

 

Solved
Best answer 06-01-2019

Accepted Solutions
Established Community Backer ***

Re: Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

@allesandre2014 

 

As I understand this, your account look like

asset, 4,173
asset depreciation, 3,771.62

 

create an income account called gain loss on asset


journal entries

debit gain loss, credit asset for 4,173
debit asset depreciation, credit gain loss for 3,771.62

 

View solution in original post

ProAdvisor

Re: Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

@allesandre2014 

 

"Loss on Disposal
( This Account is not created yet or linked to anything where to I debit the amount to: 539.00"

 

 

Since it's a non-operating one-time loss, usually it's categorized as "Other Expense" type.

On the P&L, it will show below the Net Operating Income line.

 

account_type_other_expense.PNG

View solution in original post

4 Comments
Established Community Backer *

Re: Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

The best I can tell you is that you are running a hybrid set of books.  A true cash set of books would only show cash and equity.  There would be no assets or liabilities.  I am guessing that your books are OCBOA and there are tax entries made by your accountants to account for items such as depreciation and those entries have not been recorded on your set of books.  I think you are confusing a cash basis set of books with a tax basis set of books.  Compare the balance sheet in the tax return with your balance sheet.  Ask your accountant for the adjusting journal entries.  Once the balance sheet agrees to the task return, your entry for disposal is correct.

Frequent Explorer ***

Re: Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

Thank you for the reply .

Would the Loss on disposal Account when I create it in the chart of accounts be categorized as an expense account or income account ? 

Established Community Backer ***

Re: Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

@allesandre2014 

 

As I understand this, your account look like

asset, 4,173
asset depreciation, 3,771.62

 

create an income account called gain loss on asset


journal entries

debit gain loss, credit asset for 4,173
debit asset depreciation, credit gain loss for 3,771.62

 

View solution in original post

ProAdvisor

Re: Fixed Asset - Disposal - Cash basis Accounting - Journal entry for Loss on disposal

@allesandre2014 

 

"Loss on Disposal
( This Account is not created yet or linked to anything where to I debit the amount to: 539.00"

 

 

Since it's a non-operating one-time loss, usually it's categorized as "Other Expense" type.

On the P&L, it will show below the Net Operating Income line.

 

account_type_other_expense.PNG

View solution in original post

Need to get in touch?

Contact us