Skip to main content
S
Simple
June 20, 2024
Question

Where to post money from the sale of property?

  • June 20, 2024
  • 2 replies
  • 0 views

I use QB 2022 Desktop. We sold a piece of property. Where and how do I post the deposit made from this sale? We had a loan on the property which has been paid off for a couple of years. We did make profit on it when it was sold. I deposited the money into a money market account with our bank so it will earn interest.

Thank You!

 

2 replies

BigRedConsulting
BigRedConsulting
June 21, 2024

Create a deposit in the money market account, offset by the property asset account, for the amount of the sale.

 

Then if the asset is not a 0.00 balance, create an adjustment in that account to make it zero. It sounds like you made money on the sale.  As you made money, probably use an income account for the adjustment.

Rainflurry
Rainflurry
June 21, 2024

@BigRedConsulting 

 

The asset value on the balance sheet should always be original cost so, if you do that, you will record the difference between the original cost and sale price as gain which is not correct.  The gain is the sale price less the asset's basis (original cost less accumulated depreciation).  

Rainflurry
Rainflurry
June 21, 2024

@Simple 

 

The "profit" (gain) you made on the sale is not just the sale price less the original cost.  It is the sale price less the basis of the asset (original cost less accumulated depreciation).  To record this properly, you need to know the amount of accumulated depreciation taken on the property over your ownership period.  Let's use an example of a property purchased for $250K, sold for $500K and had accumulated depreciation of $100K.  IMO, this should be recorded with a journal entry that looks like this:

 

 DebitCredit
Bank Account (sale price)500,000 
Accumulated Depreciation 100,000 
     Fixed Asset (Property) - to close 250,000
     Gain On Asset Sale (other income) 350,000

    

S
SimpleAuthor
June 22, 2024

Again, thank you for all your help. I am no expert in QB and just try to keep clean records for my church. This makes sense to me somewhat. May be a stupid question here but “why” do we have to show depreciation of the property when actually it made money for us? We paid $250k for the ground. (it was only ground no structure) and we sold it four years later for $450k. We paid $12,022.06 in interest over the loan period.

 

I wrote checks in banking/write check in QB showing principal and interest lines in the description. However, for some reason (my error I’m sure) in my chart of accounts for the ground loan long term liability it is now showing a negative balance of -250k. I hope this makes sense to you and maybe you can help me correct it. 

Rainflurry
Rainflurry
June 24, 2024

@Simple 

 

My apologies.  If this was land, then there should not be any depreciation and you and @BigRedConsulting are correct.  My mistake.  

 

When you purchased the property, there should have been the land's asset value on your balance sheet that was offset by the reduction in cash from the down payment and an increase in the loan liability amount.  When you made payments, the payment should have been broken out between the loan amount (principal) and the interest expense.  After the loan was paid of, the loan amount should be zero, obviously. 

 

Was the original loan balance recorded as a liability in QB as well as the land's asset value at its original cost of $250K?  What entry(ies) was created to bring the loan liability balance to -$250K?   

Terms & ConditionsAccessibility statement