A How-to video by Ronika Khanna (May 15, 2024) demonstrating how to record a gain or loss when selling a fixed asset in QuickBooks Online. Using a computer as an example (purchase price $2,130; accumulated depreciation $777; net book value $1,353), she shows how to: create an 'Other income' account (gain/loss on sale of fixed assets), invoice the buyer (customer: Moriarty) including HST (adds $130 on $1,000 sale), then make a journal entry to remove the asset (credit $1,130.80), debit accumulated depreciation ($777), and post the difference to the gain/loss account (loss of $353.80). The balance sheet and P&L update accordingly.
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Hello everyone. Today I'm going to show you how to record gain or loss on a fixed asset. And what distinguishes a fixed asset from another type of asset, such as a long term investment, is that there is usually depreciation attached to it. And therefore we have to ensure that we reflect that the asset and the depreciation balances are properly adjusted to reflect the gain or the loss. So the assumption that I'm making for the purposes of this tutorial is that we are selling the fixed asset. And so there are two parts to this video. One which will be the sale and how we set up the invoice for the sale. And then the second one will be to record the actual gift, gain or loss. Let's begin. Let's go to our chart of accounts. First of all, because I want to set up the account for the gain or the loss. So we'll click on new.
The account type is going to be other income. And you can have both a gain or a loss in other income. And in fact, one of the detail types in other income is gain loss on sale of fixed assets. We'll select that and it automatically adjusts the name. I'm happy with this name. So I am simply going to save and close this. And now our account is ready for us for when we do the journal entry. The next step is to set up an invoice for the sale. First, I want to go to my reports and to my balance sheet to see the value of the fixed assets on the books.
So on the balance sheet we can actually see the value of the computer which the purchase price, which was 2,130, less the depreciation that pertains to this specific computer of $777. Now it's important to note that if there are more than one.
Computer or assets in this class, then you want to identify the value of the specific computer that you're selling or writing off and the depreciation that relates to that fixed asset. Whatever the fixed asset is, we can see that the value, the net amount is $1,353. We have found a buyer for a computer and they are willing to pay $1,000 for it, which means that we will have a loss of $1,000 less the 1,353, which will be $353.80. So first of all, I would like to reflect the sale of the computer via an invoice. And the reason I'm doing it via an invoice is to, because it's a sale from our business that is registered for sales tax. I want to make sure that this is correctly reflected. So let's go to sales, click on invoices.
And we're going to create an invoice.
The customer is Moriarty. He's very eager to have Sherlock Holmes. Computer. The invoice date will be today and you can fill out the other details if you'd like. We have an automatically generated invoice number and the product or service here. The computer actually isn't here and it's important to set it up because you cannot select specifically accounts. That means you have to set up a product that is assigned to the account, which is a computer.
We are going to click on Add new. This is a. We're going to choose non inventory in this case because we're not really tracking inventory and it isn't inventory. So the name is computer.
And the important.
Part of this that you have to select is computer, which will take you to the computer which is reflected in property, plant and equipment on your balance sheet. And the sales tax on this, we can leave this blank because it will depend on where our customer is located. So let's save and close this. And now the computer shows up here. You can put a description if you'd like. And we are going to sell it for $1,000. Now, because we are registered for sales tax in Ontario and Moriarty is located in Ontario, we have to charge him 6 sales tax because we are selling him a taxable product. So I'm going to select HST Ontario and you'll see that it automatically adds the $130 to the thousand dollars. And this will show up on your GST QST payable account on the balance sheet. And then it will be reflected in whatever you file with the government age. And you can see my other videos, I have several on how to set up and file your GST, HST and QST in QuickBooks Online. So let's save and close this.
So if we go back to our balance sheet.
You'Ll see first let's just make sure that the date range is right. So we are going to use, let's just use all dates for this purpose. And you'll see the computer is now at $1130. The depreciation hasn't changed and we have $353 left. But we want to write this off completely because it no longer exists in our business. So the next step is to create a journal entry to write this off and to reflect the loss on the sale of the computer. So let's click on new. We'll click on journal entry. And I want to open this in a new tab because I need to refer to the amounts here.
So in our journal entry, what we're going to be doing is first of all, we have a computer in a debit balance and we want this to be at zero. So I am going to credit the amount of 11, 30 and 80 cents and that will just completely remove it from my balance sheet. Similarly, I have accumulated depreciation which currently is in a negative. It's called a contra account. It is a negative asset, which means it is. This is a credit balance. So we need to debit it for $777.
Now the difference between this and this is what is actually going to be the loss on the sale of the computer. So let's click on that gain loss. And QuickBooks automatically calculates this and you can type in a description reflect loss on sale of computer. If computer is more specific, you could put something more specific here. I always recommend being as descriptive as possible because we tend to forget what we did as time passes. So this is really useful to refresh our memories. And that's really it.
We will save and close this.
And now if we go back to our reports and to our balance sheet and we choose all dates, you will see that our computer and our accumulated depreciation is at zero. And if we go to our profit and loss.
And we click on this and we click on this month to date, you'll see that we have a gain or a loss on fixed assets of negative353. And because this is other income and it is a negative, it means that it is a loss. And of course you would follow the exact same process if you had a gain. So that's pretty much how you would enter a gain or a loss on the sale of your fixed assets and remove both the fixed asset and the depreciation from your books. I hope this was helpful. If you have any questions, don't hesitate to leave a comment and I will try and answer it. And please subscribe and it'll help me to make more videos. Have a great day.
