Accounting for Stolen and Sold Assets
SouthlandOutdoor
Member Posts: 17
We have had a few pieces of equipment get stolen off of our landscaping trailer, I'm not sure how to go about accounting for this. Also, we have a couple pieces of equipment that have been sold after purchasing, how do we account for the sale of such pieces?
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@SouthlandOutdoor,
Sorry to hear about your loss. For accounting purposes you would set up an account on the income statement. Loss on disposal of assets. Next Credit the for the cost the asset(s) that were stolen and debit accumulated for the amount that has already been depreciated. The difference goes to Loss on Disposal. For assets that were sold with proceeds, you would normally post the cash received against the same account, then remove the asset and associated accumulated depreciation to the same account.
@Mikeg
I'm not really following what you're saying. I don't know what the accumulated depreciation is.
I have a flatbed trailer that was purchased for $3293.10 on a credit card in Sep of 2018 and then was sold for $2000 cash in Feb of 2019.
I have 4 other pieces of equipment that were purchased with credit cards for X amount and then stolen.
@SouthlandOutdoor,
Depreciation refers to how assets are expensed over time on your tax return. Using your trailer example above. Let's say that the asset was written off (claimed as an expense) in 2018. Then the 2000 would be posted to Gain/Loss on disposal (an income statement account). Since you reduced the cost of the trailer to zero in the past you would have a 2000 gain on sale. When were the stolen items purchased? How did you treat the cost of those items. To me it sounds like you are not carrying any Property Plant and Equipment on your balance sheet. Correct?
@Mikeg
Im sorry, I really dont know a lot about the workings for this. Just one semester of accounting in high school. Im not using a balance sheet? Whenever a piece of equipment is purchased, I make a new asset account and then categorize the corresponding transaction with the asset for the purchase. Most of the equipment was either purchased in 2018 or 2019 and was stolen Feb 2020. Would a screenshot of some page help you see something Im not explaining correctly?
@SouthlandOutdoor,
The balance sheet is where your cash account, assets, liabilities and equity are. So if you creating an asset for each item you purchase then you are not expensing the asset. You will want to create a journal transaction. Go to Accounting/Transactions top right More. Now Debit the income statement account created for the loss and credit the asset for the same amounts. The asset should now be zero and the loss (expense) is now on the income statement. Same with the item sold. Credit the asset for cost and debit the disposal account. The deposit that represents the sales price should be categorized to this account as well.
@Mikeg
How do I go about creating the Loss of Disposal account? And is that the account youre referring to for me to debit on the income statement?
Yes. Go to Accounting and Chart of Accounts. Create a new operating expense. Since you have not depreciated the assets you purchased, it sounds like an overall loss on disposition. The ending balance in that account should equal the cost of the assets less the 2000 you received.
@Mikeg
That is correct
@Mikeg
The entry is backwards
@Mikeg
Ok, So I flipped the entries. Now when I look at the balance sheet report for 2018, I dont see the flatbed trailer listed in the assets any longer at all, not even with a $0.00 balance.
That is correct because when something does not have an ending balance it does not show up any longer in Wave. If you are not depreciating those assets you are losing deductions against income.
@Mikeg
Some of the assets have loans that are still being paid. But how do you go about depreciating an asset?
And to finish up the sale of the flatbed, now how do I account for selling it at $2000 cash that doesnt seem to have a deposit already anywhere?
First I would write off as Small Tools (income statement account) anything under 2500 per item. Depreciation is computed with IRS tables and uses form 4562 attached to your return. Are any of the items with a loan stolen? Even with a loan you still write off the cost of the asset over the IRS assigned lives. You have all 5 year items. Where did the 2k go? If you took it personally then you would need to make an entry to record the proceeds. Debit Owners Draw and Credit that Disposal account you created.
@Mikeg
None of the items with a loan were stolen. Also, I guess Im still missing a step between owner drawings and making the journal transaction for the disposal account. Or is that the step that marks it as sold?
And for the Small Tools write-off, I already have a "Bad Debt" expense account for writing off invoices that are not paid. Is it similar enough to use the same thing, or am I creating something totally different?
New account for the small tools. When you sold the trailer for 2k where did the money go? If it went in your pocket then the correct way is using the journal entry I gave you above. If you deposited in the business bank account, then the deposit should be coded against the Disposal account. Getting ready to sign off. I would strongly encourage to get a pro (like me (;-) to assist you. One to be sure your doing it correctly and, two to make sure you are not paying more in tax then you need to.
@SouthlandOutdoor,
Signing off for the eve
@Mikeg
So this is the sale of the flatbed trailer:
Now I'm not really following what to do for the stolen equipment, either. Is there another income statement account that I need to create?
And then what would be the steps to creating a Small Tools account and then actually writing off the equipment?
@SouthlandOutdoor,
Correct on the trailer. That says that you kept the proceeds from the sale. For the small tools, yes create another income statement account Small Tools. Follow instructions for creating another account like you did before. Then debit small tools and credit the equipment to write off. So for example
Debit Small tools - 319.50
Credit - Pole Saw 319.50
Ok thank you. So do I need to go through and do the same with the gain/loss account as I did with the flatbed trailer to make zero balances on all of the asset accounts that don’t have loans? Or just the ones over $2500?
@SouthlandOutdoor,
?
I suggested writing off the small items below 2500 as in the example I provided. That would go to Small tools. It would not matter if there is a loan or not. Only the items stolen would go to Loss on Disposition. I've given you examples of each, you'll have to take from here. Best of luck.