@Ajoeibin
"*It would appear that you really didn't understand what I did.*"
I only know what you *said* you did:
*1. cash (or funds) decreases whilst assets (whatever listing you
need/desire) increases 2. cash or funds or currency increases whilst assets
(whichever listing you used) decreases*
At no time in that post did you include a category for profit or loss
although I notice that you have now done so in a subsequent post:
*Asset disposal by sale with gainDr
Cash $1500Dr Accumulated Depreciation
$2000 Cr Gain on sale
$500 Cr Machinery $3000 *
Although this works (assuming that Gain on sale is an income category) some
tax jurisdictions prefer that you record what you get for an asset sale as
income and the depreciated value of the asset sold as an expense (this is
how shops are supposed to do their bookkeeping). It is much easier to do
this if you actually have the sales and cost of assets sold as income and
expense categories respectively rather than trying to piece it all together
from the asset category alone.
So I still recommend doing the posting this way:
Dr Cash $1500
Cr Income from sale $1500
Dr Cost of assets sold $1000
Dr Accumulated Depreciation $2000
Cr Machinery $3000
On Tuesday, October 5, 2021 at 9:45:59 PM UTC+8 Ajoeibin wrote:
> On Tue, Oct 5, 2021 at 1:34 AM psionl0 <[email protected]> wrote:
>
>> @Ajoeibin The problem with doing it your way is that at the end of the
>> exercise, your assets is now a negative value instead of zero and rather
>> than the gain/loss being included in income, it is just recorded as a
>> change in the value of your assets.
>>
>> That is why I use Asset Sales as an income category and Cost of Sales as
>> an expense category (so I can write off the cost of the assets sold).
>>
>>
> re-reading I'd bet that someone is going to mis-understand (again!)
>
> (looking for accounts (GIFI) in this area I find that for personal
> accumulation there is a 'new' model
> - - this is called the 'cost accumulation model' rather than the 'fair
> value model' used in business
> acquisition and sales)
>
> example (specific for business)
>
> Scenario 2: Disposal by Asset Sale with a Gain
> Suppose that at the end of the second year, Motors Inc. decided to sell
> the machinery to another company. At that time, the accumulated
> depreciation was $2,000. Therefore, the total book value of the machinery
> was $1,000 (machinery value minus accumulated depreciation). However, the
> company agreed to sell the machinery for $1,500. Thus, Motors Inc. must
> recognize the gain from the sale. The journal entry for the disposal should
> be:
>
> Asset disposal by sale with gain
>
> Dr Cash $1500
> Dr Accumulated Depreciation $2000
> Cr Gain on sale $500
> Cr Machinery $3000
>
> One should see 'Machinery' as a form of 'Asset'.
>
> So - - - end result - - - the way that I'm doing my records may not be the
> most succinct
> but it does cover ALL the bases and in a very orderly pattern.
>
> This whole area gets quite a bit murkier if one is acquiring
> stocks/options/other instruments
> as part of a retirement vehicle - - - at that point all of this gets some
> other inputs so that
> a present value can be achieved without needing an actual sale to display
> value.
>
> HTH
>
> Regards
>
>
>
>
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