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My company has propane tanks that we use for rentals. Occasionally,

we sell a tank, and...
My company has propane tanks that we use for rentals. Occasionally, we sell a tank, and its always at a profit. Say we bought the tank for $600, and sell it to a customer for $1250. We don't track depreciation.

We use quickbooks, and our accountant has asked us to keep these items in our system as Fixed Assets, rather than inventory, because a sale is rare. When I'm making a sale of an asset, through an invoice, the value of assets on my chart of accounts does not change even though the item is marked as sold. How can I correct this, while keeping the funds from the sale in my bank account?
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Answered in 3 minutes by:
5/27/2013
Richard
Richard, Financial Specialist
Category: Financial Software
Satisfied Customers: 39,396
Experience: IT professional, resolving issues with financial programs.
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Thanks for your Question. My name is XXXXX XXXXX I look forward to assisting you.

It is not going to be marked off as it is a fixed asset, not inventory, this is expected....

What is the downside to having it as inventory (as this is what it is)?

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Customer reply replied 4 years ago

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.

Thanks Jon

Do ti this way

1. create invoice from Fixed Asset List

2. mark asset as sold, inactive.

3. Make journal entry with 3 lines: original cost (credit fixed asset account), sale cost (debit bank account), difference (debit other income account).

This is how you process the sale of a fixed asset.

Let me know if you have any difficulties please

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Customer reply replied 4 years ago

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.

Correct Jon,

You then need to add a new deposit for the Bank Account to show the money being received.

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Customer reply replied 4 years ago

Ah ha, okay! Let me give this a shot.

No problem, let me know how it goes please

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Customer reply replied 4 years ago

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?

Leave the deposit out Jon if the amount is already showing.
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Customer reply replied 4 years ago

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.

ok, do not do the Journal entry Jon.

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Customer reply replied 4 years ago

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.

ok, enter $660 as an entry in the Journal.

It is complicated due to the Fixed Asset being sold... but can you do it this way?

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Customer reply replied 4 years ago

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?

Correct, that should balance it correctly.

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Customer reply replied 4 years ago

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.

Create an invoice from the sale, as you are going to need this anyway correct?
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Customer reply replied 4 years ago

I've done that, but I used the Fixed Asset Item as the line item for that sale. Is that incorrect?

That is ok, as that is what you are selling.
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Customer reply replied 4 years ago

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?

That can also be done, it is just hard to understand what your up to there.

But the way you explained it is workable.

Can you do this?

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Customer reply replied 4 years ago

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?

yes it will, as you are bringing costs from it.

Feel free to ask if you want anymore information.

And please remember the service rating.

Thank you

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Customer reply replied 4 years ago

Just to confirm, it would not be considered a COGS?

I do not believe so, but I cannot see exactly how you are conducting business there.

But you are not paying for them, you are selling them, so I do not see how it would.

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Customer reply replied 4 years ago

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.

ok, then it would not be considered a COGS

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Customer reply replied 4 years ago

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?

It does and it is the correct way to perform this.

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Customer reply replied 4 years ago

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?

yes, you can do this, as you can just mark off the Fixed Asset as Sold.

Then the Journal Entry completes it.

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Customer reply replied 4 years ago

Excellent! Thank you so much for your time and assistance!

Your very welcome Jon

It took some time to understand what you are doing there, but we got there!

If you have continued problems, or would like any additional information or assistance, please do not hesitate to let me know.

And if you can take a second to rate my service, that would be greatly appreciated.

Thank you
Richard
Richard, Financial Specialist
Category: Financial Software
Satisfied Customers: 39,396
Experience: IT professional, resolving issues with financial programs.
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