E T B I C MBA AGU I

How do I account for selling non capitalized equipment/spare parts no longer being used?

DO I post against the expense account I originally posted the purchase through? or do I create an "other income" GL below the Net income line. The company is selling off supplies, tools etc in anticipation of closing the business. Please advise. It's appreciated

asked Oct 21, 2016 in General by ralden123 (2 points) 106 views

1 Answer

0 votes
If you were selling in the normal course of business non-capitalized equipment/spare parts, you should have credited that to 'Other Incomes'.  It is not a good practice to credit it the expense head which was originally debited, when these assets were purchased.

Since you are selling these equipments/spare parts etc. in anticipation of closing the business, it would be a good idea to create a 'Dissolution A/c/Realisation A/c'. Whenever you sell such an asset, credit the Realisation A/c.  Similarly when you pay off an unrecorded liability debit it to Realisation A/c.  In the end you will get profit/loss on dissolution of the business which can be credited to Capital A/c /Partners' Capital A/cs in case of proprietorship/partnership business.  In case of a company you will have to show in your Income Statement.
answered Oct 22, 2016 by jbsclasses (3,967 points)
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