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Waples
November 13, 2018
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Recording the sale of a fixed asset (non-profit)

  • November 13, 2018
  • 2 replies
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I work for a non-profit who paid cash for a used vehicle many years ago, recorded the vehicle as a fixed asset on their balance sheet, but never posted any depreciation since they don't have to file taxes.  We've now sold this vehicle for cash and I don't know how to record the sale while removing the fixed asset from the balance sheet.

I created a fixed asset item so I could complete a sales receipt. I've recorded the sales receipt, but now there is a negative number listed on the balance sheet for that fixed item, which shows we earned a profit. Does that stay on the balance sheet until the end of our fiscal year and then get adjusted off somehow?

Best answer by qbteachmt

Based on your last suggestions, I made the following changes:

On the "Other Charge Item" which had been created for the Sales Receipt, I changed the linked account to our (General Fund) "Income" account.

I changed the (Gain/Loss on Asset Sales) from being an "Income" account to being an "Other Income" account.

I changed the GJE to:

Credit $1,400.00 to the "Fixed Asset" (Church Bus)

Debit $2,000.00 to "Income" (General Fund)

Credit $600.00 to "Other Income" (Gain/Loss on Asset Sales)

 

I don't fully understand your last statement "You lost $1,400 of Asset, and that reduces carry over Net Fund Balance, not Income."  Is there another entry that needs to be made after the above?

 


Here is all you should see. Start with the Disposal of the Fixed Asset:

Basis is Credited for $1,400 to Remove that from being asset value on hand; the offset is Disposal of the asset as other Income Gain/Loss on disposal of asset. Typically, there is also Depreciation to be part of this to Recapture it and the difference is the "remaining useful value we forfeited." If you never have depreciation, then you Removed $1,400 in full = total Lost Value.

 

In exchange, you Sold it and the sales receipt has $2,000.

 

And the accounting for this, reported on the P&L:

Gross Revenue $2,000

Lost from removing it  from your service $1,400

= Net of $600 Gained.

 

You seem to have the $2,000 in Twice: once as the Sales Receipt and once as the Journal Entry.

2 replies

W
WaplesAuthor
November 13, 2018

I created a fixed asset item so I could complete a sales receipt. I've recorded the sales receipt, but now there is a negative number listed on the balance sheet for that fixed item, which shows we earned a profit. Does that stay on the balance sheet until the end of our fiscal year and then get adjusted off somehow?

qbteachmt
qbteachmt
November 13, 2018

That is Not what "Fixed Asset Items" are for; they are a link to the Fixed Asset Manager, a Tax Preparer's tool that reads your QB file.

 

Remove the use of the item and Delete it entirely.

 

Your gross revenue can be listed as an Other Charge Item. The sale is your income.

 

You work with your CPA to catch up depreciation; then remove (offset) asset basis (credit) and depreciation (debit) to an Other Expense account for Gain/Loss on Disposal of Asset. Here you see the Difference = your gain or loss, and related to the Revenue.

    W
    WaplesAuthor
    November 13, 2018

    Thank you for your response, it was somewhat helpful except in relation to depreciation.  I should have been more specific, but the non-profit entity I'm referring to is a Church.  I cannot find ANY tax law which requires our church to record depreciation on assets for income tax reporting unless the sale of which is considered "Unrelated Business Income".  I thoroughly reviewed the IRS's definition of unrelated business income and the income from the sale of our 1997 Ford Bus, which was only EVER used for "furthering the exempt purpose of the organization",  is not considered taxable.  Therefore, I cannot understand the necessity for recording depreciation.  The bus was purchased used in 2011 for $1,400.00 and sold last week for $2,000.00.  So this is what I did:

    As per your instructions, I deleted the Fixed Asset Item and the sales receipt I'd used it on. 

    I created a new, "Other Charge Item", linking it to an Income Account I created called "Gain/Loss on Asset Sales".  I recorded the sale on a sales receipt with this item for $2,000.00.  I performed a GJE: Credited $1,400.00 to my existing fixed asset "Church Bus".  Debited $2,000.00 to the new income account "Gain/Loss on Asset Sales".  Credited the difference of $600.00 to my "Temp Restricted Income" account so now it shows the $600.00 revenue available only to use for asset purchase or improvements, until the Church votes on how to use the revenue.

      qbteachmt
      qbteachmt
      November 17, 2018

      "Therefore, I cannot understand the necessity for recording depreciation"

       

      I wasn't giving Tax advice; I was reviewing the Tasks to do. If you have no depreciation, then there is no recapture of it. No one here knows anything about your entity or its accounting requirements, specifically.

       

      Not taxable, etc, is also not part of this QuickBooks user topic or this forum. You stated it was Your Fixed Asset; selling your own operating vehicle is subject to your local and specific Vehicle Sales rules, for taxability, etc. No one here even knows where you are. And tracking Depreciation is not related to "taxes" in general, nor Sales Taxes specifically.

       

      "As per your instructions, I deleted the Fixed Asset Item"

       

      Perfect; it never applied.

       

      "I created a new, "Other Charge Item", linking it to an Income Account I created called "Gain/Loss on Asset Sales"."

       

      It's really the Gross proceeds, but that's fine. Your CPA or tax preparer simply needs to Find it and be told what it represents.

       

      "I recorded the sale on a sales receipt with this item for $2,000.00.  I performed a GJE: Credited $1,400.00 to my existing fixed asset "Church Bus"."

       

      Because that Removed your basis there, which you had been carrying.

       

      "Debited $2,000.00 to the new income account "Gain/Loss on Asset Sales"."

       

      Nope; this is the other side of $1,400. Your Sales Receipt already put the $2,000 Gross into this account as a Credit.

       

      "Credited the difference of $600.00 to my "Temp Restricted Income" account so now it shows the $600.00 revenue available only to use for asset purchase or improvements, until the Church votes on how to use the revenue."

       

      Nope.

       

      You got $2,000 Gross income; if your vehicles are not part of General Fund, but a Restricted Purpose, then $2,000 is Restricted Income.

       

      You lost $1,400 of Asset, and that reduces carry over Net Fund Balance, not Income.

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