Accounting for the sale of business property requires that you apply the monies received as well as the loss of assets correctly to maintain an accurate account of the business worth. A journal entry is a general listing of all the accounts affected by the sale of the property, and depending on everything contained on the property, can be extensive. Generally, the sale requires three main entries: the monies received, the loss of the property as a business asset, and the gain or loss from the sale. Anything else placed in the journal comes as a variation on those three items, whether it’s the worth of a factory located on the property, equipment contained therein or mineral rights.
Place the date of the transaction in the date column of your journal.
Write “Cash” on the line next to the date if you sold the property for cash. Otherwise label the entry as whatever remuneration you received in lieu of cash for the sale of the property, for example, stock. Record the sales price in the debit column of the line for the amount received on the sale of the property. This indicates that your cash account has increased by the amount of cash received from the property buyer.
Indent slightly on the line beneath the cash entry and write “Business Property” along with any identifying information about the specific property you sold. This indicates what you received the cash in exchange for, the business property. Record the asset book value in the credit column of the line, including depreciation of the property over time if the property includes plant and equipment. This entry indicates a loss of the property as an asset to the business.
Indent the same amount as you did for the Business Property entry and write “Gain or loss on Sales.” Record the difference in book value and the sales price in the credit column of the line, indicating the profit or loss realized from the sale of the property.
Consult an accountant if unsure of depreciation amounts applicable to the property.