So you’ve sold an asset…how do you  account for it?

Maintaining your day-to-day QuickBooks is what I call Level 1 work, the stuff involved in the routine operations of your business.

Level 2 work is stuff that comes along on a regular, predictable basis that doesn’t have to do with operations per se, like recording monthly depreciation of an asset.

Level 3 work is stuff that comes along on an irregular, unpredictable basis, like selling an asset.

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I was talking recently with a photographer client of mine. He maintains his own QuickBooks–the Level 1 stuff—and had a question about how to handle a Level 3 item: he had sold a camera lens that he bought a few years back and he wanted to know how to account for the sale of this asset.

Here’s what his Balance Sheet looked like before he sold the asset:

DR       Fixed Asset                                                              2,000.00

CR          Accumulated Depreciation                                                  2,000.00

 

He sold it for $1,800.00. Here’s how to account for it in QuickBooks.

DR       Cash in Bank                                                         1,800.00

CR          Fixed Asset                                                                                   2,000.00

DR      Accumulated Depreciation                                 2,000,00

CR          Gain on Sale of Asset **                                                             1,800.00

 

** This is an Other Income account, not a Balance Sheet account, and shows up on your Profit and Loss statement.

You might be wondering why there’s a GAIN on the sale of the asset when he received $200 less than he originally paid for it. That’s because the equipment was fully depreciated and the book balance was zero.

Put another way, he bought the item 5 years ago and at that time estimated that its “useful life” would be 4 years. So in the first four years that he owned and used the asset, he took $500 per year of depreciation. This brought the “book value” down to zero at the end of year 4. He still used the asset in year 5 and that’s totally OK.  You still “carry” the asset on your books as long as you continue to use it.

Had the item not been fully depreciated at the time of sale, he would DR only the Accumulated Depreciation up to the point of sale.

In your QuickBooks accounting, you would make these entries in the Make Deposits window, using the date your received the money as the deposit date. This way the final entry is properly recorded time-wise.

I love getting questions like this. Do you have a one that I can answer for you? Please let me know.

 

 

 

 

 

Before Christmas is the best time to buy your blank 1099 forms. Why is that? Because they are due to your vendors by January 31st, 2016 and the stores will be out of them if you wait until mid-January to pick some up.

So go online or into an Office Depot or Staples and buy them NOW so you have them.

Don’t know what the heck I’m referring to when I talk about 1099s? Then check out this post where I break it all down for you.

Need help figuring out which of your vendors should get a 1099? Or how to set up your QuickBooks so you can produce the 1099s? Give me a shout at monique@equitybydesign.com and we’ll figure out how I can help you.

 

Ken Teegardin via Compfight

 

An artist friend was complaining recently on Facebook about doing her bookkeeping on QuickBooks.    “Boo hiss,” another friend commiserated.  “These moments make you wish you were creating, I’m sure.”

 

What struck me about this was the notion that tracking and organizing one’s books was not creative.

 

Accounting and finance have a bad rap and I’m here to give you the straight skinny.

 

You know the stereotype: accountants are a bunch of boring bean counters who lack joie de vivre and élan.  We are seen as having no imagination, as robots governed by black and white rules that leave no room for, well, creativity.

 

In fact, accounting is more of an art than a science.  Yes, there are rules (called Generally Accepted Accounting Principles, or GAAP, pronounced “gap”) that we follow.  This structure gives us a standardized framework, a common language if you will.  And in that structure one finds freedom.

 

It’s a lot like how houses are built…while the outsides all look different–thus allowing for individual expression and creativity, the internal structure follows similar basic rules of construction—allowing for strong support.

 

Don’t think that you are not creating when you are tracking your numbers.  Au contraire, mon ami!  You are visioning your future and laying the groundwork for your success.

 

When you create a budget, for example, you are not just guessing about what your income and expenses are going to be for the next year.  What you are doing is creating a financial vision board, an energetic container.  You are declaring your intention to the universe.

 

Do you have a story to tell about the creativity of bookkeeping?  Let us all know in the comments section below.

 

 

 

Phototropy via Compfight

 

 

If your financial content doesn’t get organized it doesn’t get out and then your work doesn’t impact lives to the fullest extent possible.

 

And by “organized” I mean timely, complete and accurate:  the triumvirate of healthy financial operations.

 

Don’t get stopped by your own confusion.  Let’s unpack those three conditions that need to be extant in order to be on top of your business.  While each one is important in its own right, none of them can stand alone.  It’s like a three-legged stool: neither leg by itself is worth much.  It’s only when all three are together that you have something to sit on!

 

Timely:  The minimum frequency to do your books is once a month.  Sure, you could do your books once a year the weekend before the 15^th of April and that will get you your taxes done.  But keeping your books up to date in real time gives you timely information.  It’s also a heck of a lot easier to code your transactions when only a couple of weeks have past, rather than over a year.

 

Complete:  It doesn’t do any good to have your checking account fully entered for the month, but not your credit card transactions.  You need each and every transaction accounted for to get the full picture.

 

Accurate:  It’s possible to have transactions entered into your QuickBooks in a timely and complete way, yet have your “Airfare” expenses codi incorrectly into “Marketing Supplies.”  Hey, it happens.  This is where the timeliness principle comes in handy:  when you’re reviewing your Profit & Loss statement once a month, you’re more likely to notice something wonky because your trip will be fresh in your mind.

 

Let me know if you have any questions or comments about this.  Love to hear from you!