Asset Disposal Loan Payout

Asset Disposal Loan Payout

Asset Disposal Loan Payout

I purchased a new vehicle and traded in the old one. The old vehicle had an outstanding loan of $14,000, and I received a trade-in allowance of $17,000. I have credited the old vehicle asset and debited accumulated depreciation, and the difference resulted in a gain or loss. However, I am unsure how to account for the $3,000 gain on the trade-in. What should I do with it?

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Jul 26, 2023
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starstarstarstarstar 		Asset Disposal Gain Treatment
by: BB

The $3,000 gain on the trade-in should be recorded as a credit to a gain account. This gain account should be separate from the asset's book value and accumulated depreciation. The gain represents the difference between the trade-in allowance received ($17,000) and the book value of the old vehicle ($14,000), resulting in a positive gain of $3,000. By recording this gain separately, it helps in accurately tracking the financial impact of the trade-in transaction on your books.

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Assets Or Expenses

by Niekia
(Canada)

Expense Classification

Expense Classification

We run an irrigation business. We buy parts and receive an invoice. We then use those parts pretty much immediately to complete the job at which point we invoice the client for the parts and the service. When recording our purchase of the parts should they be recorded as assets or expenses? Thank you for your help!

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Jul 26, 2023
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starstarstarstarstar 		Expense Classification For Irrigation Business Parts
by: BB

When recording the purchase of parts for your irrigation business, you should classify them as expenses rather than assets. Since you use the parts immediately to complete the job and invoice the client for both the parts and services, the parts are considered a direct cost of providing the service. Therefore, they should be recorded as expenses in your accounting records.

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Asset Reimbursement Trade

by Elaine
(Brighton, Ma)

Asset Trade

Asset Trade

How do I account for an employee who is owed reimbursement money but will take the company laptop in trade? How do their reimbursements get out of the unpaid bill detail?

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Jul 26, 2023
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starstarstarstarstar 		Accounting For Employee Reimbursement With Trade
by: BB

To account for an employee who is owed reimbursement money but will take the company laptop in trade, you can follow these steps:

Record the Reimbursement Owed: Debit an accounts payable account for the amount owed to the employee for the reimbursement.
Credit the employee's reimbursement account or a specific liability account for the same amount.

Record the Laptop Trade: Debit the laptop's asset account for its fair market value.
Credit the accounts payable account for the same amount.

By recording the above entries, the reimbursement owed to the employee will be reflected in the accounts payable section of your balance sheet. When the laptop is taken in trade, it will be credited from the accounts payable section, reducing the outstanding bill. The remaining balance of the employee's reimbursement will be paid out to them or adjusted accordingly.

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Bookkeeping Assets As Debits

by Linda Hampton
(Martinez, CA )

Assets As Debits

Assets As Debits

I am trying to learn the basics of bookkeeping and I can't seem to grasp the concept of assets as a debit. I am using Bookkeeping for Dummies and Bookkeeping Made Simple as study guides.

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Jul 26, 2023
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starstarstarstarstar 		Debits and Credits in Bookkeeping
by: BB

It's completely normal to find some accounting concepts challenging, especially when you're just starting to learn bookkeeping. Let's try to break down the concept of assets as a debit to make it easier to understand.

In bookkeeping, assets are resources that your business owns and are expected to provide future economic benefits. Examples of assets include cash, accounts receivable, inventory, equipment, and buildings. When you record an increase in assets, you use a debit entry.

Think of a debit as an entry that increases the value of an asset account. Debits are recorded on the left side of the accounting equation (Assets = Liabilities + Equity). On the other hand, credits decrease asset accounts and are recorded on the right side of the equation.

For instance, when your business receives cash from a customer as payment for a product or service, you would record the transaction as follows:

Debit: Cash (to increase the asset account)
Credit: Sales or Accounts Receivable (to record the revenue)

By using the double-entry bookkeeping system, you ensure that every transaction has an equal debit and credit, maintaining the balance in the accounting equation.

It's great that you're using study guides like "Bookkeeping for Dummies" and "Bookkeeping Made Simple" to learn the basics. Continue to practice and review examples to reinforce your understanding. With time and practice, concepts like assets as a debit will become clearer. Remember, patience and persistence are key when learning bookkeeping!
May 17, 2011
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starstarstar 		Debit or Credit
by: Anonymous

I don't think any of us who are trying to understand this stuff can understand why an increase to a bank account is a DEBIT. It has been adopted by accountants as a check on balances. All debits must equal all credits. When one account has a DEBIT it affects another account with a CREDIT.

It also has to do with the "Normal Balance" of an account. IE: Asset accounts have a Normal Debit Balance, meaning that they increase with a Debit. Also, Expense Accounts have a Normal Debit Balance. This account too increases with a debit. All other accounts, Liability, Equity, and Revenue have a Normal Credit Balance, and Increase with a Credit.

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Fixed Assets Property

by Nicki
(Guernsey)

Fixed Assets

Fixed Assets

How do you bookkeep the purchase costs of fixed assets property?

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Jul 26, 2023
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starstarstarstarstar 		Recording Property Acquisition Costs
by: BB

To bookkeep the purchase costs on property, you would record the transaction in the appropriate accounts. Here's a general guide on how to do it:

Purchase Cost: When you buy the property, you would debit the Property asset account for the total purchase cost, including any related expenses like closing costs, legal fees, or property taxes.

Financing: If you finance the property with a loan, you will credit the liability account (e.g., Mortgage Payable) for the loan amount received.

Down Payment: If you make a down payment, you will credit your Cash account for the amount paid.

Accumulated Depreciation: Over time, as the property depreciates, you would debit the Depreciation Expense account and credit the Accumulated Depreciation account.

Repairs and Improvements: If you make repairs or improvements to the property, you will debit the appropriate expense account (e.g., Repairs and Maintenance) for the cost incurred.

Property Income: If you generate rental income from the property, you will credit the Rental Income account.

Property Expenses: Expenses related to the property, such as property management fees, property taxes, and insurance, would be debited to their respective expense accounts.

Remember, it is essential to consult with a professional accountant or bookkeeper to ensure that your specific property purchase is accurately recorded and complies with accounting standards and regulations.

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Partner Asset Distributions

Partner Asset Distributions

Partner Asset Distributions

How should a cash distribution to a partner, without reducing their percentage of ownership in the LLC, be recorded in the chart of accounts and the Profit and Loss statement? I have it as an expense, but I am unsure if it is correct. If cash distributions are not deducted on the 1065, the partner's tax liability may be affected, as they would be paying tax on the distribution as income and also on their share of partnership profit.

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Jul 26, 2023
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starstarstarstarstar 		Partner Cash Distribution Tax Implications
by: BB

Cash distributions to partners should not be recorded as expenses in the chart of accounts or the Profit and Loss statement. Instead, they are accounted for separately as partner withdrawals or distributions. These distributions do not impact the partner's percentage of ownership in the LLC. On the partnership tax return (Form 1065), the cash distribution is not deducted as an expense. Instead, it is reported on the Schedule K-1, which reflects each partner's share of partnership income, losses, and distributions.

The partner will include the cash distribution as income on their personal tax return and pay taxes accordingly. The partnership profit is also reported on the Schedule K-1 and taxed at the individual partner's level. Double taxation does not occur since the cash distribution is not treated as an expense on the partnership level.

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Selling An Asset

Selling An Asset

Selling An Asset

When a business sells a fixed asset (that was donated to business) how is it recorded?

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Jul 26, 2023
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starstarstarstarstar 		Recording Fixed Asset Sale
by: BB

When a business sells a fixed asset that was previously donated to the business, the transaction is recorded in the accounting books as follows:

Debit Cash (or Accounts Receivable if the sale is made on credit) for the amount received from the sale.

Credit the Accumulated Depreciation account for the total accumulated depreciation on the fixed asset up to the date of the sale.

Credit the Fixed Asset account for the original cost of the fixed asset.

Any gain or loss on the sale is recorded in the Income Statement. If the selling price is higher than the carrying value (original cost - accumulated depreciation) of the asset, it results in a gain. Conversely, if the selling price is lower, it results in a loss.

The total of the credits should equal the total of the debits to ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced.

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