How to Record the Sale of Assets in QuickBooks Desktop & Online?

Recording the sale of an asset is important as it helps to preserve the integrity of your accounting records and ensures compliance with financial reporting standards. 

Using a methodical approach in QuickBooks, you can simply keep track of transaction details, change asset values, and account for the impact on your financial statements. This guarantees accurate and current records, which improves financial management and decision-making.

Why is it important to record depreciation while recording asset sales?

Recording of asset sales begins with the calculation of depreciation. So, first, calculate both depreciation and accumulated depreciation and then start with the journal entry. 

Depreciation is important to record as it helps businesses determine the current value of an asset after all the wear and tear incurred during the accounting period. 

In accounting, it’s crucial to mark the asset as “inactive” when selling it. All these transactions are recorded in a journal entry that includes the record of gain or loss.

Tips and Tricks for Recording Sale of Assets in QuickBooks

Recording asset sales in QuickBooks helps provide a correct financial report of the transactions. One of the best ways to start recording asset sales is to create a separate account in the QuickBooks chart of accounts.

This allows you to monitor the proceeds from asset sales and ensure they are accurately recorded and classified. When selling assets, the “Fixed Asset” type account should be used.

Utilizing Quickbooks’ “Class Tracking” tool can help segment asset sale transactions according to distinct departments or segments, offering comprehensive insights into sales performance across multiple categories. 

Make Sure to Record Depreciation Before Selling an Asset

This procedure guarantees the integrity of financial reporting. Businesses that account for depreciation in their financial statements give a more accurate picture of their asset values.

Therefore, depreciation recording must be included in the asset sale procedure to provide accountability and transparency.

Use the “Fixed Asset Item” for Recording Fixed Asset Sales

One efficient way to ensure correct categorization and depreciation adjustments when registering the sale of fixed assets is to use Quickbooks’ “Fixed Asset Item” feature.

This function maintains proper ledger management and simplifies the sale paperwork procedure, allowing for precise financial changes. By leveraging this functionality, businesses can effectively manage their fixed assets and ensure compliance with accounting standards and regulations.

Use the “Other Charge Item” for Recording Property and Vehicle Sales

This feature allows detailed tracking of costs that typical categories might not cover. Businesses may precisely record all financial complications by using the “Other Charge Item” function, which facilitates quicker accounting adjustments and more accurate financial reporting.

Additionally, it streamlines documentation procedures, guaranteeing openness and commitment to legal orders.

Set Up a “Sale of Assets” Account for Tracking Sales

A systematic method for tracking and monitoring asset sales can be established by creating a special “Sale of Assets” account in QuickBooks. This ensures clear financial visibility and thorough reporting.

It enables companies to accurately track their finances by allowing them to record the proceeds from the sale of assets painstakingly. When creating financial reports, this account facilitates thorough documentation and quick access to historical data by separating asset sale transactions from other revenue streams.

How to record the sale of assets in QuickBooks Desktop?

Part 1: Check Depreciation and Accumulated Depreciation

Once the asset has been purchased, its reduction costs need to be determined before selling it. The recording begins with the calculation of depreciation and entering the depreciation and accumulated depreciation amount.

1. Click on the Lists menu.
2. Choose the Fixed Asset Item List.
3. Locate the asset (which you are selling) from the list.

Step 1: Entering the depreciation amount for the asset.

1. Double-click on the asset. An Edit Fixed Asset Window will appear.
2. Enter the depreciation and accumulated depreciation amounts.

Step 2: Locate the asset to check depreciation

Part 2: Record Depreciation Before Sale

Recording depreciation before sale of an asset is important as it shows the decreasing value of an asset over a period of time in a financial year. The depreciation and the accumulated depreciation amount are recorded through a journal entry.

Step 1: Make a journal entry

1. Click on the Company menu.
2. Select Make General Journal Entries.

Step 2: Enter the depreciation details

Put the depreciation expense. [ It will include the following:

1. Date the entry as the day of sale.
2. Debit the Depreciation Expense account.
3. Credit the Accumulated Depreciation account.
4. Enter the depreciation amount that hasn’t been recorded yet.
5. Review the entered details.
6. Click on Save & Close.

Part 3: Record the Sale of the Asset

Recording the sale of assets is important because it helps in maintaining the financial accuracy and showing the realistic representation of asset values. Now, once you have calculated the depreciation and the accumulated depreciation amount. It’s time to create the invoices.

Step 1: Create a Sales Receipt or Invoice

1. Go to the Customers menu.
2. Select Create Sales Receipts or Create Invoices based on the type of sale.
3. Choose the customer buying the asset.

Step 2: Enter the asset details

1. In the Item column, select the fixed asset item from the list.
2. Put the sale price of the asset.
3. Ensure the amount is correctly entered in the Amount column.
4. Save the sales receipt or invoice.

Part 4: Remove the Asset from the Fixed Asset List

Removing an asset from the fixed asset list is important to maintaining accurate financial records. It helps reflect the true value of the company’s assets and liabilities, preventing asset overstatement. As the asset is now sold, then the asset needs to be removed from the “Fixed Asset List” of QuickBooks account by marking it as “inactive”.

Step 1: Find the asset from the list

1. Go to the Lists menu.
2. Choose Fixed Asset Item List.

Step 2: Mark the sold assets as “inactive”

1. Right-click on the asset you sold.
2. Click on make Item Inactive.

Part 5: Record the Gain or Loss on the Sale

Recording the gain or loss on the sale of an asset is crucial for facilitating better strategic planning and resource allocation. It is not necessary for the sold asset to be sold at a profit. Sometimes, businesses also sell assets at a loss.

Step 1: Create a Journal Entry for the Gain/Loss

1. Click on the Company menu.
2. Click on Make General Journal Entries.

Step 2: Enter Gain/Loss Details

Put the Gain/ Loss information. [ It will include the following:

1. Date the entry as the day of sale.
2. Debit the Accumulated Depreciation account for the total accumulated depreciation of the asset.
3. Debit the Cash or Bank account for the sale price received.
4. Credit the Fixed Asset account for the original cost of the asset.

Note: If there is a gain on the sale, credit the Gain on Sale of Asset account for the difference. If there is a loss, debit the Loss on Sale of Asset account for the difference.

Step 3: Save and Close

1. Review the entry for accuracy.
2. Click on Save & Close.

How to record the sale of assets in QuickBooks Online?

Part 1: Check Depreciation and Accumulated Depreciation

Once the asset is purchased, its reduction costs must be determined before selling it. The process starts with calculating depreciation and entering the depreciation and accumulated depreciation amounts.

Step 1: Access the Chart of Accounts

1. Log in to QuickBooks Online.
2. Click on the Accounting tab in the left navigation pane.
3. Select Chart of Accounts.

Step 2: Review Depreciation Accounts

1. Find and review the accounts related to the asset, including Depreciation Expense and Accumulated Depreciation.

Part 2: Record Depreciation Before Sale

Recording depreciation before the sale of an asset is essential because it reflects the declining value of the asset over time within a financial year. Both the depreciation and accumulated depreciation amounts are documented through a journal entry.

Step 1: Make a journal entry

1. Click on the Company menu.
2. Select Make General Journal Entries.

Step 2: Enter the depreciation details

Put the depreciation expense. [ It will include the following:

1. Date the entry as the day of sale.
2. Debit the Depreciation Expense account.
3. Credit the Accumulated Depreciation account.
4. Enter the depreciation amount that hasn’t been recorded yet.
5. Review the entered details.
6. Click on Save & Close.

Part 3: Record the Sale of the Asset

Recording asset sales is essential for financial accuracy and asset value representation. Create invoices after calculating depreciation and accumulated depreciation.

Step 1: Create a Sales Receipt or Invoice

1. Go to the Customers menu.
2. Select Create Sales Receipts or Create Invoices based on the type of sale.
3. Choose the customer buying the asset.

Step 2: Enter the asset details.

1. In the Item column, select the fixed asset item from the list.
2. Put the sale price of the asset.
3. Ensure the amount is correctly entered in the Amount column.
4. Save the sales receipt or invoice.

Part 4: Remove the Asset from the Fixed Asset List

It is crucial to remove an asset from the fixed asset list to maintain accurate financial records. This ensures that the company’s assets and liabilities are correctly represented, preventing overstatement of assets. When an asset is sold, it should be marked as “inactive” in the “Fixed Asset List” of QuickBooks.

Step 1: Find the asset from the list.

1. Go to the Lists menu.
2. Choose Fixed Asset Item List.

Step 2: Mark the sold assets as “inactive”

1. Right-click on the asset you sold.
2. Click on make Item Inactive.

Part 5: Record the Gain or Loss on the Sale

It is crucial to record the gain or loss on the sale of an asset to facilitate strategic planning and resource allocation. It’s important to note that the asset sold doesn’t always have to be sold at a profit; businesses may sometimes sell assets at a loss.

Step 1: Create a Journal Entry for the Gain/Loss:

1. Click on the Company menu.
2. Click on Make General Journal Entries.

Step 2: Mention Gain/Loss Details:

Enter the Gain/ Loss information. [ It will include the following: 

1. Date the entry as the day of sale.
2. Debit the Accumulated Depreciation account for the total accumulated depreciation of the asset.
3. Debit the Cash or Bank account for the sale price received.
4. Credit the Fixed Asset account for the original cost of the asset.

Note: If there is a gain on the sale, credit the Gain on Sale of Asset account for the difference. If there is a loss, debit the Loss on Sale of Asset account for the difference.

Step 3: Save and Close:

1. Review the entry for accuracy.
2. Click on Save & Close.

Conclusion

One of the most important steps in keeping correct financial records is entering the sale of an asset into QuickBooks. Ensure that QuickBooks has all information accurately entered, including the sale price, any accrued depreciation, and the asset’s disposal. A journal entry must be made to remove the asset from the balance sheet and record any profit or loss from the sale.

By taking these actions, you can make sure your records are current and adhere to accounting rules while appropriately reflecting the effect of the asset sale on your financial statements.