I honestly don't know. I'm just doing what the owner has asked, which is what the accountant asked. That was to have these items be marked as Fixed Assets. I just spent several hours taking all of our old bills, and converting the inventory line by line to individual assets. I just need to know now, how to properly track these items in a sale.
On my first sale attempt, I put the fixed asset into the invoice by replacing the original line item. After processing the sale, my fixed asset balance did not change to indicate the item was sold.
I forgot to mention on my original question that this is all retroactive for 2012. So I'm going back and changing old invoices from an inventory sale to an asset sale.
Do you mean credit the other income account, with the difference? And then from that point, how does the difference make it into my bank account, because we did gain money on the sale.
Ah ha, okay! Let me give this a shot.
Now when you say "Debit Bank Account", you mean my checking account, where funds go after I deposit them from the sale?
Now I see an increase of $1250 in
Let me run this whole process by you just to make sure I'm on the right path, because I think may have duplicated something here by also making the invoice.
When I made the sale of the tank, I created an invoice for the customer. The invoice was paid and I received a check into my Undeposited Funds. I deposited the check, and moved the money from undeposited funds to my checking account.
Now I'm creating a journal entry, to add $1250 to my checking account (which I think is the duplicated step that was already accomplished by making and paying the invoice), taking $600 out of the value of my tank asset account (because thats how much I bought the tank for),
and putting the difference into an "Other Income" account, which I then return to my checking account through a deposit?
Well, I haven't gotten to the last step yet, of making the deposit from the Other Income account, but my checking account is already seeing an increase of $1250 that it shouldn't be, and this was caused by the journal entry's debit to the bank account. This seems to be a duplicate step, if I'm processing the invoice for a customer and he pays.
I'm sorry this is confusing, I don't think I'm articulating the issue very well here.
Then how do I get my fixed asset account to reflect the $600 value change because of a tank that has been sold? I think this is ultimately my question.
Oh okay, I think I got it.
Are you saying to make a journal entry that takes the cost of the tank from the asset account, and move it to the Tanks Sold "Other Income" account.
This will make my P&L show a -$600 though. Is that correct?
And then where would the income for that sale show up on the P&L Standard report? I don't see the fixed asset sale anywhere on here.
I've done that, but I used the Fixed Asset Item as the line item for that sale. Is that incorrect?
Right, but it doesn't appear on the P&L under Income. I think this is because assets do not show up on a P&L. However, I just had a thought.
Would the proper way be to make "Non-Inventory" items to reflect the tanks that are only used when a sale is made?
The customer pays the invoice and we report the sale of the non-inventory item. Then we mark the Fixed asset as sold and deduct the cost from the fixed asset account, using a journal entry?
I think so. One more thing - If I go this route then, does the account I use to transfer the cost of the tank sold from the Fixed Asset account, still count as an "Other Income" since it will always be in the negative?
Just to confirm, it would not be considered a COGS?
Let me just paint the scenario here one last time.
Tanks are bought from our vendor with the intention to rent them to our customers. We sell propane gas. Our customer pays us a monthly or annual rental fee to keep our tank on their property.
Once in a blue moon, the customer wants to outright purchase a tank from us. I think the reason our accountant wants us to keep them as Fixed Assets, is because of how rarely we sell them. To us, most of our tanks are assets and we don't keep a separate supply to just sell - Again, that's just not something we normally do.
Cool. Okay, now having that clarified (I'm sorry it wasn't clearer in the beginning), does it make sense how we do this?
When we buy a tank from a vendor, we make a bill. In the bill, we'll use the items tab and add a Fixed Asset Item for each individual tank we purchase. They are designated by volume (gallons) and their serial number in the Asset Name/Number field. The asset account I apply the tank Item to corresponds to an Asset Account with the same volume differentiation. We pay the bill with a check from our checking account.
When a customer, out of the blue, says I want to buy one of your tanks. We don't have any on hand to sell from inventory, so we use one of our rentals and sell it with a markup. What I'll do is make an invoice and use a Fixed Asset Item that corresponds to a physical tank.
When I receive payment for that invoice, I'll receive it in Quickbooks, but it does NOT modify the value of the Fixed Asset account. For this I need to create a Journal Entry (in addition to the invoice) which takes the value of the tank sold (for the dollar amount at which we purchased it), and moves that value to an "Other Income" account. This will deduct the value of the tank that has disappeared from our rental assets, and move it to a sold designation account. This account will only ever show a negative balance.
Does that all sound correct?
I made one mistake above. Because I found earlier that a sale of an asset doesn't appear on a P&L Report, I meant to say, on the second paragraph -
When a customer, out of the blue, says I want to buy one of your tanks. We don't have any on hand to sell from inventory, so we use one of our rentals and sell it with a markup. What I'll do is make an invoice and use a Non-Inventory Item for the actual sale. When I've made the invoice, I will go into the Fixed Asset Item List and mark the item as sold and inactive. Then I will do step three, with the Journal Entry. Is that still correct?
Excellent! Thank you so much for your time and assistance!