@impedance19
"1. According to your note you included the commission-paid of $4000 in the "Bank Account" debit entry and also as a "Commission Expense" debit of $4000, is this correct?"
Yes, correct. I mentioned that because I assumed the $4K was withheld from your closing proceeds, thereby reducing the debit entry by $4K ($1K + $10K - $4K), as opposed to a separate $4K credit entry if you had paid the commission separately. A debit to your bank account is a balance increase in accounting terms. Unlike how when a bank takes money out of our account, they "debit" it. Therefore, in accounting, when you credit your bank account, you are reducing the balance.
"I follow all of your entries (except as noted in [1] above). The problem I have is that as you have shown, the "Gain on Sale of Asset" of $69,000 (the real number is much higher) would count as income in 2023; therefore, if I understand correctly, I would have to pay taxes on this total gain with my 2023 tax return. Since this was owner-financed I have not received any cash (other than the down payment), but only a promissory note. Is there a way to enter this transaction so that I pay taxes each year only on the monthly income received during each year from the purchaser as he pays off the loan?"
Great question and I should have mentioned it in my post. The journal entry I gave you is the proper way to record it in terms of financial accounting. That is different than the tax implications (tax basis) of the sale. You are correct that the amount financed is not necessarily considered gain from a tax basis perspective since this will qualify as an installment sale. Your CPA/tax accountant should handle the proper way to record this from a tax perspective. Based on what you or I know, there is no way to properly record this in QB from a tax perspective at this point. Most CPAs do not make adjusting entries that take into account the tax implications of the sale. The gain is booked as per my journal entry and the adjustments are made on the tax return. Presumably, you have a CPA/tax accountant? I would not recommend trying to prepare a return containing an installment sale without professional help.
If you prefer, you can change the account name used to record the "Gain on Asset Sale" to "Deferred Gain on Asset Sale". However, this requires making a journal entry each month or at year-end to move the amount of deferred gain to gain by debiting "Deferred Gain on Asset Sale" and crediting "Gain on Asset Sale". That really is not necessary as your tax returns are what matter and it creates more work/more room for errors). Hopefully, this all made sense.
