Disposal of Fixed Assets

Software: QuickBooks accounting software

Sales of fixed assets such as computers, machineries, vehicles or properties are common in businesses.

Example: if a Fixed Asset cost was $100,000.00 with an Accumulated Depreciation value of $60,000.00 and you sold it at $75,000.00; how should you enter this into QuickBooks?

Cost of fixed asset and accumulated depreciation accounts are part of your balance sheet accounts, which you should have these two accounts when you were preparing your book. You need to create a new “Disposal of Fixed Asset” account (You can name it differently), which can be either an Other Income of Other Expenses type of account. This account will be used to capture all the profit or loss made in sales of fixed asset.

Besides, you need to create an item, can be either Non-Inventory or Other Charges item type and name it as “Sales of Fixed Asset”, this item will be linked to the “Disposal of Fixed Asset” account that you had just created. Note: In the invoice transaction, you can only select “Item” and not “account” directly; therefore, an item is needed to bridge between invoice transaction and account.

In the transaction, you create an invoice to your customer for the sales of fixed asset (select the “Sales of Fixed Asset” item that you had just created). The double entry for this transaction will be debit Accounts Receivable account $75,000.00 and credit Disposal of Fixed Asset account $75,00.00.

Next, you pass a journal to move your cost of fixed asset and accumulated depreciation balances into the disposal of fixed asset account. The double entry should be debit Accumulated Depreciation account $60,000.00, credit Cost of Fixed Assets account $100,000.00 and debit Disposal of Fixed Asset account $40,000.00.

 

2011_0812_DisposalFA

Now, the balances for both the ‘Cost of Fixed Asset” and “Accumulated Depreciation” account should be zero. From the Profit and Loss report, the Disposal of Fixed Asset account will show a profit of $35,000.00.

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