How to add income category to journal entry
jininvt
Member Posts: 4
I'd like to record the sale of the capital asset. This is how my journal entry current looks like.
How can I add a category for the debit category?
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Please note that I am aware that I can add a transaction and just simply choose an income category. However, doing that will mean that I can't select a cash account for the debit transaction.
How can I have both the debit account (e.g. bank account) and income category (e.g. realized gains)?
@jininvt,
The sale of an asset is usually a 2 step process. First, recognize the income. Debit cash and credit Income. If the Sale of Asset is an income account then the you have the first part correct. A credit to an Income account increases the balance. The second part is to remove the asset (cost). You would debit the Sale of Asset account and credit the asset that you sold. As an example, let's assume that the bitcoin-Gemini cost 100 at purchase. You paid cash from POSB. The original entry would have been debit Investment in Bitcoin - Gemini (an asset) and credit Cash - POSB (an asset). This is merely reclassing assets. Now I sell the asset for 299. The first entry would record the 299 in income (as above). The second entry would remove the asset. Debit Sale of Asset 100 and credit Investment in Bitcoin - Gemini. The Sale of Asset account on the income statement detail would have a credit of 299 and a debit of 100. Leaving a balance of 199 as net income from the sale.
Hope that helps
Hi Mike
Thank you. I'm still a bit confused. From your response,
I gather that I should have journal entry of:
1. Debit - $299 - "Realized Gains" income category
2. Credit - $100 - "Bitcoin - Gemini" asset account
3. Credit - $199 - ???
Also, the problem is that Entry #1 adds $299 in the income category (which shows up in the income statement). But it doesn't debit anything into the "POSB (Cash)" account.
Ideally, this is what happens:
1. I do a basic transfer of $99 from "POSB (Cash)" to "Bitcoin - Gemini"
2. I sell / do a transfer of $199 from "Bitcoin - Gemini" to "POSB (Cash)"
3. I record $100, the profit, in the "Realized Gains" income category
Could you write out a line by line journal entry that I could use? Thank you.
@jininvt,
Sure, first Item 1 above should be a debit to Cash POSB because you received proceeds from the sale. The credit would be to realized gains on the income statement. This is using one journal entry to record sale, which is fine too. In your 3 item journal entry, you have recorded the receipt of cash (item 1) removed the asset (item 2) and recorded the gain (item 3). $299 (proceeds) - $100 (cost) - $199 profit.
For your request
1.
Debit Investment in Bitcoin-Gemini $99 (asset account)
Credit cash-POSB $99 (asset account)
(to record the purchase of bitcoin-Gemini)
2
Debit Cash POSB $199 (asset account)
Credit Realized Gains $199 (Income account)
(to record sale of bitcoin-Gemini)
3
Debit Realized Gains $99
Credit Investment in bitcoin-Gemini $99
(To record removal of sold asset)
2 and 3 can be combined like this:
Debit cash POSB $199
Credit Investment in Bitcoin-Gemini $99
Credit Realized Gain $100