I have some equipment that I have sold along with 10% GST. The equipment sold is used.
How and where would I account for this.
Question - was this equipment part of your Balance Sheet Fixed Assets and was it being Depreciated
If yes - lets set up this model - Fixed Asset account original cost 1000, Prov for Depreciation account 200 and proceed from sale 500 + 50 gst
Using Received Money (Cash or Bank) the deposit would be 550
Line entry - Credit Fixed Asset 1000 - this would cancel the original purchase
Line entry - Debit Prov for Depn 200 - this would reverse the depn provided to date
Line entry - Debit Expenses Account “Loss on Sale Fixed Asset” 300 - balancing value
allocating the gst where applicable.
If you can’t allocate the gst with Receive Money, then create a Sales Inv using the above entry data and do a separate deposit
If no, then just Receive Money the proceeds 550 to any Income account - Misc Income, Disposal of Equipment etc with the gst allocation, Or do a Sales Inv and separate deposit
Hope this has provided you with a framework to work by
@Brucanna’s reply is correct from an accounting viewpoint, but overlooks some of the simplifications provided by Manager. Manager’s implementation is really quite elegant.
If you have properly accounted for the fixed asset under Fixed Assets tab, Receive Money and allocate the receipt to Fixed assets account and the subaccount for the specific asset. You can select the tax code to apply. So enter the actual sale price, not the total amount with tax. Any difference from book value will be automatically applied to a built-in expense account that was created when you enabled the Fixed Assets tab.
Again in the Fixed Assets tab, Edit the asset involved by ticking the Disposed Fixed Asset box and filling in the date field that appears. This handles reversal of your original investment and accumulated depreciation and makes appropriate entries on the Fixed Asset Summary report.
Now, if you were not accounting for the equipment as a fixed asset, you may have legal and tax reporting problems, depending on the value and economic life of the equipment. But those are different issues. If the equipment was something small enough not to be accounted for as a depreciable fixed asset, @Brucanna’s recommendations are correct. Just choose an appropriate income account in which to record the sale.
@Tut thank you for the in sight in your response to the proper working of Manager’s Fixed Asset.
However I am puzzled by your comment “you may have legal and tax reporting problems” - How so?
I was referring to a possible situation in which local law required depreciation of an asset over time but that was not accomplished. As you know, thresholds vary as to what must be capitalized and depreciated versus taken as a current expense. So book value, from which any loss or gain on disposal would be determined, might not be properly available.
Whilst I understand your response, the fact is tax departments today are less focused on pure accountings, should the asset be capitalised or be expensed, because at the end of the day they understand that the accounting result at the end of the equipment’s life is the same. For example in the four countries that I operate the tax authorities allow a flexible rather then a prescriptive asset write off / depreciation schedule - this allows management not the tax department to decide the assets economic life
I understand, @Brucanna. The trend certainly seems to be toward more flexibility. But, for example, while recently liberalized, the US still sets value limits and imposes depreciable life categories and methods. And to make things more complex, even some fairly expensive assets can be fully deducted in the current year up to a total. Then, the next asset purchased, even though lower in value, might have to be depreciated over time. I suspect the rules have more to do with lobbying (if you use that term) than with rational accounting.
Thanks for the input people.
The item is in its 5th year of depreciation
Sold for $5500 this includes GST @10%
My accountant normally deals with theses sorts of transaction so I’m getting my head around this.
Are you asking for more guidance, @Othila? If so, what other questions do you have?
I think I’m ok. After speaking with my Accountant I need to put this down as income and at Tax time this will be adjusted.
The correct way would be to have asset created under Fixed assets with proper starting balance (assuming you owned that asset when you started with Manager_
After you receive money from customer for sale of this asset, the asset should be disposed (there is an option to do that in Manager) and difference between selling price and book value of asset would be automatically posted as gain (loss) on sale of fixed asset.
What your accountant is saying is to put the sale straight into income account and they will figure out the gain (loss) later and make a journal entry to adjust.
Both ways are OK, the second way means your accountant will spend time on this. And your profit will not be accurate until your accountant makes an adjustment.
Thanks Lubos,
I’m not sure on the book value of my asset. I assume this would be where the depreciation schedule sits as of current date of sale. I’m only guessing?
Yes that’s right. That’s why when you are starting an existing business on Manager, you need to set up starting balances for all your fixed assets too. Starting balances of fixed assets can be taken from depreciation schedule.
But most accounting practices don’t care what you do because they run their set of books on your business in parallel. Then once a year they try to catch up with whatever reports you have provided them.
It’s really up to you whether you want to dive into double-entry accounting principles or just do whatever and let your accountant sort it out once a year.