How do you record the sale of an asset in your bookkeeping software?
Did you sell your truck for a profit? Dispose of equipment at a loss? Do you know how to record that in your bookkeeping software?
The asset and its depreciation should be up to date before entering the journal entry to record the sale or disposal of an asset. These are the accounts that you’ll need:
Dr Accumulated depreciation (if any, asset account)
Dr Cash (if you get something for it, asset account)
Dr Gain/Loss on disposal of asset (if there’s a loss, other income account)
Cr Asset (the original/full amount)
Cr Gain/Loss on disposal of asset(if there’s a gain, other income account)
So, let’s say you sold your truck for $20,000. You paid $19,000 and it’s been depreciated $2,000. Credits must equal the debits; you can see that you gained $3,000 on this sale.
The journal entry would look like this:
Dr Accumulated Depreciation $2,000
Dr Cash $20,000
Cr Truck $19,000
Cr Gain on sale of asset $3,000
Now, let’s say you dispose of an air compressor. If it’s fully depreciated, then you break even; you’ve used its whole life. Here’s the journal entry:
Dr Accumulated Depreciation $3,000
Cr Air Compressor $3,000
If the air compressor wasn’t fully depreciated, then you’ve taken a loss:
Dr Accumulated Depreciation $2,000
Dr Loss on disposal of asset $1,000
Cr Air Compressor $3,000
To learn more about assets and depreciation click here
Have fun! And be nice to your bookkeeper!
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