do you sometimes sell your personal non-business assets well then you should watch this video
and learn how to record the selling of non-business personal assets
if you have any questions about this topic you can leave them in the comments 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
when you sell a non-business asset you must compare what you originally paid for the asset
to what you are getting paid for the sale of the asset if what you originally paid for the asset
is more than what you got paid when you sold it then you have a gain however if what you paid
for the asset is less than what you got paid for the asset in that case you have a loss
now what type of accounts in the chart of accounts would be a gain or loss from the sale of an asset
well the gain on a sale of an asset would go in your chart of accounts as an other income type of
account it goes at the bottom of the income statement after net income from operations
because it does not reflect how you would normally operate that's because you're not really in the
business of selling these assets you must include in taxable income if you have a gain from the sale
of a non-business personal asset or any kind of personal property
the capital gains are calculated differently on the tax forms than in quickbooks separating
them by making them an other income type of account will help you file your taxes later
however a loss on the sale of an asset would go in the chart of accounts as an other expense type of
account it goes at the bottom of the income statement after net income from operations
because again it does not reflect how you normally operate you're not in the business of selling your
personal assets please note a loss on a sale of a personal asset that you're not using for business
is not deductible it is not deductible if you have a loss on selling personal non-business property
for example let's imagine on november 1 of 2016 we sold the electronic bike for four thousand
dollars so if the balance of the bike is three thousand because that's what we originally paid
then we have a gain on the sale of a thousand dollars so let's first create the gain account
before we record the sale from the top left we click list chart of accounts in the bottom
left we click account new now the type is not income the type is other income because it's not
part of you the income that you earn from the way you would normally operate or work
on your jobs we then click continue and we're going to name it specifically for that asset
gain on sale of bike save and close now we can record the transaction and we'll take a look
we're selling it for a thousand dollars now when you sell what will be the result well cash goes
up to twelve thousand six eighty one because cash will be 4 000 more than it is now
because we just got 4 000 for the bike electronic bike becomes zero
because we just sold it and it should have no value in our books and records and the gain
from the sale of the bike should show up for a thousand dollars to record the sale of any asset
you must make a journal entry and we will not discuss the concept of debits and credits
i'm just going to give you a small piece of advice to follow and you can use this video as a guide
to know exactly what to debit and what to credit if you are selling one of your assets
so it's very simple we close this out and we look at the trial balance now the debit and credit
idea is very simple if an account is normally on the debit side you would put it as debit in the
journal entry if you want to increase it and you would put it as credit in the journal entry if you
want to decrease it and the opposite would be true for an account that's normally on the credit side
if an account is normally on the credit side you would increase it by putting it as credit in the
journal entry and putting it as debit if you want to decrease it so simply watch the pattern of the
debits and credits and repeat these steps as you see them if you're selling an asset from the main
menu we click company make general journal entry now first you have to make sure that you remove
the check mark and that the check mark is not checked in the box that says adjusting entry
this is not an adjusting entry it is an actual transaction and the date of the transaction in our
little story is november 1st of 2016. the first line that you click is account click the pull down
and first you choose the bank account that the money from the sale went into
and you choose chase bank now chase bank is an asset that normally has
a debit balance so to increase an account that has a debit balance we make more debit
and the account is increasing by four thousand dollars
now if you keep pushing the tab key quickbooks moves to the next line but it
doesn't know that there are three accounts in this transaction so it's trying to balance the entry
let's remove the thousand and on the next line we'll actually choose the electronic bike
now electronic bike currently has a debit balance and we're trying to wipe out and remove the debit
balance so in order to wipe out and remove a debit balance of three thousand we make
a credit in that same amount the balance of the account three thousand now keep pushing the tab
key and when quickbooks moves to the third line it balances the entry now this is the moment that we
choose the account we just created because we know that a thousand dollars is the gain on the sale
so we click the pull down and we scroll down to the account that we made gain on sale of bike
now it should be on the credit side because income is on the credit side and this is very
similar to normal income but watch carefully gains on sales of personal non-business
assets are taxable and therefore you must uh include them they are
not exempt income and this is the class choice you make when you are choosing
um the class to make sure that this income is in fact included in your estimated taxable income
now when you click save and close and just click say we don't need classes for any balance sheet
item so we click save anyway and you can see cash in bank is exactly the number we expected it to
be twelve thousand six hundred eighty one dollars electronic bike has become zero because we sold it
and if we scroll down you can see gain on sale of bike is now one thousand dollars
the interesting part is in the profit and loss if you open the profit and loss and you scroll all
the way to the bottom you will see that the gain on the sale of bike is included in income but it's
not included in ordinary operating income because it is not part of what you normally do to earn
money so it made your overall income go up but not your operating income or your net ordinary income
and let's also click reports company and financial profit and loss by class push a for all and scroll
down to the bottom and you can see in the column that counts as taxable income and non-did and
deductible expenses the column that you're going to estimate your taxable income with you will see
at the bottom that the gain on the sale of the bike i can make this column bigger the gain on
the sale of the bike is taxable and it is showing up in the column that estimates our taxable income
to reinforce this idea let's do a second example let's imagine on november 5th
of 2016 we sold the couch for one thousand five hundred dollars so if the balance of the couch
is two thousand the loss on the sale will be five hundred let's create the loss account
now from the main menu click list chart of accounts then in the bottom left
click account new now this is not an expense this is other expense and its other expense because it
is not part of your normal operations and it will go on the bottom of the profit and loss
so that it does not affect how the profit and loss shows how you normally operated that month
click continue and the name of the account is loss on sale of couch
save and close now what will be the results after we record this sale well cash goes up by to 14
181 because we will have 2 000 more dollars from the sale of the couch the couch becomes
zero because we don't have the couch anymore and the loss from sale of couch will show up on the
trial balance for the first time as five hundred dollars let's take a look at how to record it
from the main menu click company make general journal entry now the date was november 5th
and our bank account is increasing so as we learned a moment ago we will make a debit
for the amount of money that we are physically receiving for the couch
now quickbooks is trying to balance the entry so i remove the money amount and i choose the
actual couch now remember we're putting the couch in the journal entry because it currently
has a debit balance and we want to remove a debit balance so the way to do that is to make a credit
in the journal entry window for the amount of the balance so we credit the couch 2000 keep
pushing the tab key and now quickbooks balances the entry by putting a 500 debit and we know
that the loss on the sale of the couch is the amount of hundred dollars so the account we choose
is the one that we just created and it makes sense that it should appear on the debit side
because the effect of a loss is similar to the effect of an expense it lowers your income
and if expenses are on the debit side it makes sense that the loss is as well now
when we click save and close and say oh oh we're not finished the most important thing to know
is that this loss is not deductible because it is a loss on a sale of a personal non-business asset
so we must choose the other one we must choose the non-deductible class this time
because a loss on a sale of personal property cannot affect the taxable income or should not
so we click save and close and don't worry about the other two accounts they're not on
the profit and loss click save and now you can see cash is exactly as what we expected it to be
fourteen thousand one hundred eighty one dollars couch became zero because we no longer have the
couch and you can see loss on sale of couch shows up for five hundred dollars on the profit and loss
you would have to scroll all the way to the bottom below net ordinary income to see how the loss on
the sale of the couch lowered your overall net income for the month or for whatever time period
you're looking at and lastly you can open reports company and financial profit and loss by class
a for all and scroll to the bottom okay scroll to the bottom and notice that the loss on sale
of couch is not deducted from your taxable income column it's in this junk column here and remember
this column means nothing it's meaningless all that means anything is the non-exempt deductible
column which is just a raw estimate of your taxable income assuming you recorded everything
properly
you