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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

Solved
Best answer 12-10-2018

Accepted Solutions
Established Community Backer ***

I don't see two sided entries in your example, but the tr...

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

2 Comments
Established Community Backer ***

I don't see two sided entries in your example, but the tr...

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

Active Member

Re: I don't see two sided entries in your example, but the tr...

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.