Disposal of Fixed Asset

hfayaz

Dear,
We have sold a car which was bought 28k, and for which we took into account 8k of depreciation charges. We sold it for 24k and need to know how to take this disposal into account on wave please..
Many thanks,
Rgds.

James_Hudson

Hey hfayaz,

I've laid out two different journal entries below to explain how you can account for selling a depreciated asset. The first example shows how to account for the sale if you sold the asset for more than its value (after depreciation) and the second shows you how to account for it if you sold it for less than its value.

Gain on sale of asset:

Cash/bank: Debit
Accumulated depreciation: Debit
Fixed assets: Credit
Gain on disposal: Credit

Let's say you had a camera that you bought for $1500 last year, and it depreciated by $500 over the year. If you sold that camera for $1200, the transaction would look like this:

Gain on sale of asset:

Cash/bank: Debit - 1200
Accumulated depreciation: Debit - 500
Fixed asset (camera): Credit - 1500
Gain on disposal 200: Credit -200

Now here's what it would look like if you sold the asset at a loss:

Loss on sale of asset:

Cash/bank Debit
Loss on disposal Debit
Fixed asset (camera) Debit
Gain on disposal Credit

Going with the camera example, let's say we sold the same $1500 that depreciated $500, but this time we sold it for $900:

Loss on sale of asset:

Cash/bank Debit - 900
Loss on disposal Debit - 100
Accumulated Depreciation Debit - 500
Fixed Asset (camera) Credit - 1500

Note: for the above, you'll have to add Gain on Disposal income account, or a loss on disposal expense account, depending on which scenario you're going with.

SFWaver2016

When setting up the Gain on Disposal of Asset, which account type should it fall under in the Chart of Accounts? The options being Asset, Liability, Equity, Income, or Expense.

Mikeg

@SFWaver2016,
Income

Scoot

I've just started using Wave. Im not an accountant and would like more information on how to record the purchase and sale of assets. I dont understand how I record the initial expenditure and in turn how I give someone a receipt for the sale. Please could you give me screenshot examples. I purchased a van which I sold 12mths later and made a profit on.

AlexL

Hey @Scoot , for transparency purposes we're not accountants either so we always recommend getting in touch with a CPA directly, but this article on depreciation should help you record the purchase of your van along with the depreciation that it faces as a capital asset.