What are the correct journal entries for the sale of a business per the closing statement and associated closing entries for capital assets?

gibbswf · ‎December 10, 2018

I have sold my business and have a journal entry that aligns with the settlement statement from the closing. In addition, I have created several closing entries on the sale of all capital assets that were associated with the sale of the business. Each of the entries individually look to be correct and align with directions given from online searches. When taken together in total however, my cash balance is overstated significantly and the overall gain on asset sales is overstated as well. How are the entries supposed to be made to avoid this problem?

john-pero · ‎December 10, 2018

The selling price is direct from your settlement sheet. The underlying assets sold may have a current value of zero if fully depreciated. If the assets have a declared value in settlement you will have recapture of depreciation to deal with. In selling the whole business whatever your current book value of the entirety would be the basis. You might not have to enter individual transactions against these but instead a single entry that zeros all remaining asset value against sale price.

But this is certainly more complicated than possibly what our free advice from a distance can accomplish.

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john-pero · ‎December 10, 2018

The selling price is direct from your settlement sheet. The underlying assets sold may have a current value of zero if fully depreciated. If the assets have a declared value in settlement you will have recapture of depreciation to deal with. In selling the whole business whatever your current book value of the entirety would be the basis. You might not have to enter individual transactions against these but instead a single entry that zeros all remaining asset value against sale price.

But this is certainly more complicated than possibly what our free advice from a distance can accomplish.

qbteachmt · ‎December 10, 2018

"my cash balance is overstated"

Then something you posted as a Debit, you put to the wrong account. You don't post to Banking unless Banking really happened for that amount.

"the overall gain on asset sales is overstated as well. How are the entries supposed to be made to avoid this problem?"

In general, you recapture depreciation, if any, and you remove basis. That difference is Gain/Loss. Nothing here, hits banking.

Separately, you got Money = that is gross sales minus any expense you incurred, such as a Commission holdback.

If you do it like that, there is Nothing in Banking except the Money to Banking.

Rustler · ‎December 10, 2018

The best thing you can do is get with a tax accountant, as well as the business having to file a final return, the sale will impact on your personal return too.

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What are the correct journal entries for the sale of a business per the closing statement and associated closing entries for capital assets?