I purchased the vehicle on 17/01/2018 for cost of 13000/ . on September 15th 2018, one customer agreed to buy the car for 15950/ but on installment basis
Monthly 1450 X 11 months. Kindly help me to enter this transaction.
The asset purchase and disposal are completely separate. I assume you recorded purchase of the vehicle according to this Guide: Purchase fixed assets | Manager. My response does include recording that purchase.
For the sale, you must first create a loan asset account. Next, dispose of the asset according to this Guide: Dispose of fixed assets | Manager. This transfers the book value of the asset to the Fixed assets - loss on disposal expense account and clears your balance sheet of everything related to this vehicle.
Now, record the sale with a journal entry. Debit the loan asset account you just created by the sale amount; credit Fixed assets - loss on disposal by the same. This transfers your book value back to assets, but in the loan account rather than the Fixed assets account. It also transfers the profit you have made on this sale. In your case, since you are selling for more than the book value, Fixed assets - loss on disposal will now show a negative balance, indicating the amount of profit.
When the buyer makes payments, post the receipts to the loan asset account.
Note: I have not addressed any interest. If part of the agreed payments is interest, you would reduce the sale price recorded in the journal entry to reflect the actual purchase price. And the receipts would be split between the loan asset account and an interest income account.
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When I make the disposal and Journal entry as you mentioned. Loan asset account shows (Balance sheet under Assets) 15950/ and Disposal of Assets (Income statements expenses) 13000/. Is that my entry correct?
That does not sound right. The point of the journal entry was to move the book value from Fixed assets - loss on disposal to the loan asset account. It also moved the amount of the profit to offset the negative expense left behind in Inventory assets - loss on disposal. Now you have an asset (the loan) that can produce future income, assuming the buyer pays as agreed. But the amount left behind should only be the profit, not the full original purchase price of the asset.
The balance in these accounts could also be off because you did not record purchase of the vehicle correctly. Please post screen shots of two pages:
- The payment by which you recorded purchase of the vehicle back in 2018.
- The journal entry by which you transferred profit to the loan asset account.
I am also concerned that you may not have recorded any depreciation of this asset during the time you owned it. That would have reduced the amount posted into Fixed assets - loss on disposal. But that is a separate issue that would affect your reportable income, but would not be involved in this disposal process.
So I await the screen shots requested above.
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I should have said, I need the Edit screens for the journal entry and payment. Only they show full information.
Also, was the screen shot of the Summary page showing expenses taken before or after the journal entry was made?
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Journal entry I made
(Loan Asset account) (I create new Account in the Assets)
(Fixed Assets - loss on disposa)l I selected from Income statement Expense
But I think something go wrong because when i go again to edit windows its shows like this.
Have a look at the Dispose of fixed assets guide. Manager should post to that account when you follow the guide
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Your problem is simple. You have posted the credit from the journal entry to the Suspense account. Most likely, when taking your screen shots, you either clicked the x in the account selection field or forgot to click Update.
When you correct that, Fixed assets - loss on disposal will show a balance of -2,950, corresponding to your profit on sale of this vehicle.
You still have the problem that during the 18 months you owned the vehicle, you posted no depreciation. Your tax authority will not like this. Failure to record depreciation has two effects:
- Deprives you of the benefit of deducting the depreciation from your income during 2018 and 2019, so your taxable income is higher.
- Understates your profit (income) on sale of the vehicle in 2019. (This is the one the tax authority will definitely not like. They probably will not care that you failed to take advantage of depreciation expense, because that works to their advantage.)
You give the impression of being inexperienced at accounting. I urge you to consult a qualified accountant about this depreciation issue. When you have determined what the depreciation should have been, you need to enter it into Manager. To do that, you will need to first delete all the transactions we have been discussing. Then enter all the depreciation. The result of that will be a lower book value for the vehicle. Next, dispose of the asset again and re-enter the journal entry. The end result will be a bigger negative balance in Fixed assets - loss on disposal.
Thank you so much Tut. Yes Will get the knowledge as you instructed. Now the Fixed assets - loss on disposal shows a balance of -2,950.