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Level 1

Sell a fixed asset

When you sell a fixed asset how do you book the sales tax?
A machine was purchased in May 2010 for $12,000
Sold in Sep 2013 for $2,500 Plus Tax ($325) Total $2,825
The accum. Amot/Depr.. is: $6,298
The book value is: $5,702
“Clearing” is an Other Current Asset account and to be deposit later into the Bank account.

I made a General Journal Entries for the asset sale as: (Snap from 2010 QB)

Account                                                Debit                      Credit

Clearing:                                               2,500

Machine Cost:                                                                     12,000

Accum Amort./Depr:                              6,298

Proceeds from Sale of Asset:                3,202

So how can I track the Tax that collected from the Sale ($325)? Do I need place that amount of tax within the Clearing amount ($2,825 instead of $2,500)? But still no Tax will be recorded? Thanks

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Best answer 12-10-2018

Best Answers
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Level 15

Sell a fixed asset

I don't see two sided entries in your example, but the transaction has to hit the balance sheet as well as the P&L

You didn't say but if the depreciation figure you show does not include partial year depreciation, you need to calculate and post partial year depreciation expense first - I'll use your numbers though below

create an income account called gain/loss on asset sale
journal entries

debit gain/loss 12,000
credit fixed asset 12,000

debit accumulated depreciation asset 6,298
credit gain/loss 6,298

create an other charge item called asset sales, set the income account to gain/loss account and set it to taxable

use a sales receipt and sell the other charge asset sales item for 2,500, QB will calculate the sales tax and post it.

deposit the check

View solution in original post

2 Comments
Highlighted
Level 15

Sell a fixed asset

I don't see two sided entries in your example, but the transaction has to hit the balance sheet as well as the P&L

You didn't say but if the depreciation figure you show does not include partial year depreciation, you need to calculate and post partial year depreciation expense first - I'll use your numbers though below

create an income account called gain/loss on asset sale
journal entries

debit gain/loss 12,000
credit fixed asset 12,000

debit accumulated depreciation asset 6,298
credit gain/loss 6,298

create an other charge item called asset sales, set the income account to gain/loss account and set it to taxable

use a sales receipt and sell the other charge asset sales item for 2,500, QB will calculate the sales tax and post it.

deposit the check

View solution in original post

Highlighted
Level 1

Sell a fixed asset

I need some help with your answer.  In your response "create an other charge item called asset sales, set the income account to gain/loss account and set it to taxable," what is a "charge item?"  We sold a rental property on which we took depreciation.  I followed your instructions on another answer you gave on "selling a fixed asset" but our balance sheet shows the fixed asset and the money gained from the sale, nearly doubling our true asset/equity condition.

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