QB Pro 2015 - Fixed Asset Sale - double entries for gains and bank deposits

JayFleming · ‎February 01, 2021

Hello Community,

I'm trying to clean up my books and properly remove some fixed assets that were purchased in years past and sold or disposed of last year. I'm pulling my hair out trying to make sure I don't have double entries for sales prices and such. I'll outline the problem I'm having below, hopefully as concisely as possible.

When following the normal convention for selling a fixed asset, I created a GJ entry crediting the Asset account, debiting the accumulated depreciation account, debiting my bank account (checking or intermediate account has the same result), and crediting a Gain account. This is fine and it zeroes the asset account, however...

Then items that sold received a payment against them. I can create an invoice or sales receipt and apply the payment which is deposited to a bank account or intermediate account (same result). I also mark the item as sold within the Fixed Asset Item dialog and enter the sales info (date, price). By creating the invoice or sales receipt and add the Fixed Asset as an item and receiving a payment against either, it creates an entry on the Fixed Asset account for the sales price, which throws off the account balance/zero. Also, when I receive the payment and deposit it into the bank account, there is a double entry from the GJ entry. Now, after this process, on my P&L, I have an amount on my Gains from Asset Sales account, plus an amount in my Sales income account, therefore realizing gains twice. I feel like half of the work I've done should not be done but it doesn't make sense why not. Any help is appreciated.

john-pero · ‎February 02, 2021

You are doubling up because you are entering twice as many transactions as you may need. The journal entry (although journal entries can cause issues with cash vs accrual and the inability to track transaction by name) recorded your sale, receipt of money, removal of asset value, and gain.

The sales receipt (or invoice plus payment) recorded your sale, receipt of money, reduction of asset value - but not the complete removal of asset and gain.

Your order of completion of the two tasks is reversed (if you intend to use two transactions)

START with a Sales Receipt. This will set the sale price and money received AND reduce the asset value by an amount equal to the sale price (asset may go negative but will be corrected later)

THEN enter a journal entry to recapture depreciation, and record gain to get asset value to zero.

The Sales Receipt credits the asset by the sale price. Down and dirty, the difference now of net asset value to zero is either gain or loss. If the asset value went negative due to the sales receipt then to zero the asset you offset with gain (net income)

An example where you buy and hold but did not depreciated (just like inventory for resale) your inventory is an asset, be it current or fixed. Bought for $10k, Sell for $12k. The Sales Receipt will show $12k cash money to be deposited, and a Credit against the asset of $12k. Your asset value just went negative - to minus $2k.

Now you do a journal entry, Debit Asset $2k, Credit Gain on Sale $2k. The JE is used AFTER the sale to zero out the asset value. If you had sold for $8k instead of $12k your journal entry would be the opposite and you would record a loss on sale.

Any prior depreciation taken (as ordinary deduction) is recaptured when you have a gain over current value.

So, in my above example, say we had depreciated $2500 over two years. your book asset value is $5000 (10k-2.5k-2.5k) but it consists of two numbers. Asset value = $10k, Accumulated Depreciation on that asset = $5k

Sale at $12k made our asset value drop to negative $2k. Journal entry DR asset $2k DR Accumulated Depreciation $5k, CR Gain on Sale $7k In simpler terms, you sold something for 12 whose current book value is 5, thus a gain of 12-5=7

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john-pero · ‎February 02, 2021