Selling an Asset

When you sell an asset, you need to back out (get rid of) the asset’s account balance, record the cash (or whatever) that somebody pays you for the asset, and record any difference between what you sell the asset for and its value as a gain or loss.

If you purchase a piece of land for £5000 but later resell it for £4000, for example, you record the sale of the asset using a sales receipt and reverse the value of the asset using a journal entry. But you have to do some legwork before you can make these two entries. Follow these steps:

1. Set up an Asset Disposal Gain account (of type Other Income) if you expect to make a gain on the sale or an Asset Disposal Loss account (of type Other Expense) if you expect to incur a loss on the sale.