QuickBooks Question

[Terry D EA]

Using QuickBooks 2010. Client is selling off assets. I fully understand the journal entries required to record the sale, gain/loss on the sale, removing the asset and debiting the accumulated depreciation accounts. If I were the one entering these sales at the time of sale, I would have used a journal entry instead of using the undeposited funds accounts to record the receipt of the cash and all of my entries would balance.

Client has already entered the deposits using the undeposited funds account as the "account from" and did not create an "Other Income" account for the gain/loss on the sale of the assets. I have created this account and the only way I see to do this is to delete the deposits and use journal entries. Any suggestions?

Also, client used and paid an individual commision to obtain buyers for the sale of these assets. Would this be recorded as a separate expense account or add the amount of the commission paid to one of the larger asset's basis as a expense of the sale? Either way, the impact is same on the bottom line just need to know the proper way to do this so it is GAAP compliant with the financial statements.

One more bit of information. The books have not been reconciled nor any bank accounts since 12/31/2012. All sales were in 2013 so undoing any reconciliation isn't an issue.

[ILLMAS]

Yes a journal entry would work best, here is an example:

D C

Cash XXX

Building XXX

A/D Building XXX

Gain/Loss on Sale XXX or XXX Income account

If the commission was paid at enclosing, I would just reported it separately and reduce it from the gain/loss or if necessary you can create a closing cost account. Where it makes a real difference is on the tax return, for book purposes just reporting the gain/loss is what is important.

[jklcpa]

Can't you simply have the bookkeeper edit the transaction that records the deposit and post it to the Other Income account that you've created? I have a couple of clients that I use QB for after the fact bookkeeping for, and I never have used that undeposited funds account. I enter deposits directly in the check register and post the credit directly to the account I want it to go.

I agree with MAS. We were typing at the same time. GAAP reporting won't care how you got to the proper answer, as long as you get there.

[Terry D EA]

I'll look at what you are saying Judy. I created an other income account to record the gain or loss. I tried to edit the deposit transactions but in doing so, my journal entries to remove the asset and accumulate depr won't balance that way. I tried to change from the nude posited funds account to the asset account but again the other entries don' t balance. Mas is right with the entries which is what I am using. I' ll see if others will respond before I have the deposit entries reversed.

[jklcpa]

Yes Terry, you are correct that a different journal entry would be needed. If you post the proceeds to the Other Income account, or whatever you call it (I would call it Gain(Loss) on Asset Dispositions), then you would make an entry to remove the asset cost and accum deprec from their accounts with the balancing part of that entry being the NBV posted to the Gain(Loss) account to offset the proceeds that have been posted there via the deposit, and so that the resulting balance in that account is the gain or loss on the disposition. Like I said, there is more than one way to get to the result. Just make your explanation of your AJEs clear and have a workpaper with the details for when you do the return and financials.

[Terry D EA]

Judy I don't mean to be a little dense minded here but what is NBV? New Book Value? I'm a little confused.

[ILLMAS]

You mentioned that 2013 hasn't been reconciled, you can simple void the deposit or delete, your JE will affect cash which will show on your bank rec. Ah and NBV stands for net book value.

[Terry D EA]

I've looked at this a few times. The reason I suggested deleting the deposits so the gross proceeds would go to "Cash" with that being the checking account, remove the asset and accu depr with the gain/loss going to the "Other Income" account titled gain/loss on asset disposition. This would allow the financials to be correct with the gan/loss showing as a below the line item on the P&L and the balance sheet would be correct as well. I do have a worksheet with all JE's and explanation. things get a little stickier here as the total amount for the sale of each asset was not received at the same time. If this bookkeeper would have contacted me prior to these transactions she wouldn't be doing extra work.

[ILLMAS]

Has the client finally received the complete sales amount?

[Terry D EA]

Yes.

[ILLMAS]

Okay here is what I suggest, lets say your client had 2 buildings:

Building 1

Cost $250,000

A/D ($125,000)

Building 2

Cost $100,000

A/D ($55,000)

He then sold both buildings for $500,000 and received an initial payment of $300,000 and received the remaining balance in 3 separate payments. This is how I would record, of course deleting the deposit of $300,000.

D C

Cash $300,000

Building 1 $250,000

Building 2 $100,000

A/D $125,000

A/D $ 55,000

Gain on Sale $330,000

Receivable $200,000 You can name this a due from or note receivable

Totals $680,000 $680,000

Then once the other payments come in, you would offset them to receivable. If the contract to sell everything at once, this how your JE should look. Hope this helps.

[Terry D EA]

Thanks MAS that is exactly how my JE's look. It is undoing what has already been done in QuickBooks that is my concern so it reflects exactly as you say.

[kcjenkins]

Terry I think what jklcpa meant by NBV was Net Book Value.

[Terry D EA]

I agree KC. I have come to the conclusion that the only good way to do this in QuickBooks is to delete the deposits and re-enter then via the general journal input as cash directed back to the original checking account and then all of the other entries will balance perfectly. Only fifteen items to do this with. Oh well it is what it is.