and now we will learn the last part about flipping houses part three selling the property if you have
any questions about this topic you can leave them in the comment section below and I'll do my best
to help you and of course if you feel the video helped you I hope you will click like and don't
forget to subscribe to get updates on new videos that come out all the time what happens when you
sell the property well you no longer have the fixed asset in your records called Livingston
Street you no longer have the fixed asset in your records called renovations or upgrades
you do have more cash in the bank and you have a gain or a loss on the sale those are the four
things that are affected in your records when you sell the property when you make the journal entry
simply list each of these things separately and everything will work out perfectly it will be the
easiest transaction you ever recorded before we do that we have to add an account or at least two
accounts into your chart of accounts you have to add an account called gain of the sale of property
and that has to be an other income type of account but just in case you might sell it as a loss you
should also add loss on the sale of property and we will make that an other income Osumi other
expense type of account so very simple in the chart of accounts list chart of accounts again
in the bottom left account new this one is other income not income not income other income because
it will go in a different place and it belongs in a different place in your profit and loss report
click continue and we'll type in the words gain on sale of property then we'll click Save a new
and we'll choose other expense type of account and we'll put loss on sale of property and we'll
put save and close now we have the two accounts we need just in case we have either a gain or a
loss for example let's imagine on October 31 we sold the house for a hundred and fifty thousand
dollars well what do we do if you look at the trial balance we can see the amount we have here
as debit for the building is a hundred thousand so in the journal entry we have to make a credit
to wipe that out a credit for a hundred thousand to this account same thing with the renovations
it has a debit balance but if we no longer have the building we should not have this account in
our chart of accounts so because it's on the debit side we have to make a credit to wipe it
out now notice cash and bank now has a negative balance and again you can study about debits and
credits in the supplemental videos but if cash is credit it means it's negative that means when we
get the hundred and fifty thousand it will go on the debit side and of course it will decrease this
neg it will not be a full hundred fifty thousand because we already have a little bit of a negative
balance and the difference will be either a gain or a loss so from the main menu click company make
journal entry click OK and of course we have to put the date October 31st of 2020 now again this
building has a debit balance so we have to make a credit of a hundred thousand for the building
for that particular account building on Livingston Street then when we click the next line QuickBooks
is trying to balance the entry for us it doesn't know that we're not finished after two accounts so
let's wipe out what QuickBooks suggests go ahead and find the renovation account renovations 110
Livingston Street and that was a debit balance of fifteen thousand so to wipe it out because we
sold the house we have to make a credit pushing tab now the cash we got goes into cash and bank
but it's not a hundred and fifteen thousand remember QuickBooks is just trying to balance
the entry change it to the actual amount of cash that we got push tab now if we keep pushing tab
QuickBooks again is trying to balance the entry and it's showing us oops giving it's showing us
that the difference between all that we paid for the house and the amount we got paid for
the house that difference is thirty five thousand dollars and because the amount we got paid was
more than what we paid for the house plus what we renovated we now have to choose this account
gain on sale of property so did we account for all four of these items in the journal
entry yes we did compare each of the things that were necessary to what we actually put
now when we click Save and close and click OK aha you can see the building is gone it's down
to zero the renovations are gone is down to zero cash went from a two or three thousand
dollar negative balance to a hundred and forty seven thousand dollar positive balance because
we received a hundred and fifty thousand and of course at the bottom here you see gain on the
sale of property now I need to show you what the normal profit and loss would look like with this
game from the main menu click reports company and financial profit & Loss standard and push
a for all notice the profit and loss has a normal income section see his income section income from
late fees rental income earned and the total income then it has an expense section for all
of the different expenses that we pay during the course and that it has ordinary income so
we made normal rental income minus expenses this amount 56 675 however in an additional section for
something that we don't normally do on a regular basis we had another income that's listed here at
the bottom gain on sale of property and now this net income is the real amount of net income that
should be considered when filing for your taxes now to get the whole picture you should try a
second example let's imagine that we instead sold the house for ninety five thousand well
let's just delete what we entered if we click the journal and scroll to the bottom we get the
most recently entered transactions we can double click this then click Edit transaction in order
to bring it back in front of you then you can delete it click delete and click ok now we'll
re-enter it fresh let's imagine that we sold the house so again building on Livingston Street we
have to make a credit for a hundred thousand the renovations account same thing it has a
debit balance of fifteen thousand so we have to make a credit of that same amount to wipe it out
but now this time the cash and bank that we got was only ninety five thousand so when QuickBooks
balance is the entry aha QuickBooks says we need a debit this time to balance the entry
we need a debit this time because the amount of cash on the debit side that we received is not
as much as the total that we pay for the house and the renovations so if the cash we got is
not the same as it's not more than the total of what we paid for the house the renovations then
that difference logically is a loss he lost on the sale of property and this is what it would
look like if you got less than what you paid for the house plus what you paid to renovate
you would have this loss when we click Save and close and click OK we can notice that the profit
and loss now shows a loss on sale of property for 20,000 and it lowered our ordinary income