Sell a fixed asset by using a free text invoice
To work with free text invoices, you need to create a customer who buys a fixed asset. Alternatively, you can use an existing customer. When you know which customer you want to use, you can create a new free text invoice.
To create a free text invoice, follow these steps:
Go to Accounts receivable > Invoices > All free text invoices. You can also start from the Customer invoicing workspace by selecting the New free text invoice button.
Select New.
Fill in the following fields for the header:
Customer account
Invoice account
Date (defaults to the current data)
Currency (defaults to the customer's currency)
Go to the Invoice lines and Line details FastTabs. Select a fixed asset on the General tab on the Line details FastTab. This action selects the asset book and populates the main account for the asset on the invoice line.
Use a fixed asset posting profile to select the ledger account that you plan to use for the sale. To view the profile, go to Fixed assets > Setup > Fixed asset posting profiles.
Select Disposal - sale in the Ledger accounts dropdown list, and then select the SLSL asset book for this example.
Add a description and the amount of the sale on the Invoice lines FastTab. The system copies the description to the invoice text.
The financial dimensions on the invoice line use the default dimensions for the customer. Select the Financial dimensions line tab in the Line details section of the Free text invoice page to view the default values. If you want to use the dimensions from the asset, you can override the customer defaults.
Post the free text invoice by selecting the Post button on the Free text invoice page.
Review the fixed asset valuation
To understand the postings that occur for an asset, you need to review the Fixed Asset valuation page. Two asset books post: the SLSL book posts to the Current layer, and the T_150_SLLR book posts to the Tax layer.
The following example uses the SLSL asset book. To view the valuation, go to Fixed assets > Fixed assets. The Fixed assets list page displays. Select the Valuations menu item.
The asset was acquired for USD 10,000.00, the depreciation is USD 1,333.36, and the net book value is USD 8,666.64.
The asset sold for USD 9,000.00, a value that's more than the net book value of the asset at the time of sale. The system records the difference between the net book value and the selling price as profit/loss. After the sale, the Net book value is zero because the asset is no longer on the books. The selling price is listed as Disposal - sale price.
Review the voucher
Open the Invoice menu on the Free text invoice page and then select Invoice journal. When the journal list displays, select the Voucher button.
Postings to the Tax layer from asset book T_150_SLLR show. For this example, focus only on the postings to the Current posting layer from asset book SLSL.
The following grid is filtered for the Current posting layer only and it's grouped by ledger account with subtotals on the amount. The result of these postings is as follows:
A profit of USD 333.36 shows. This amount is the difference between the selling price and the net book value at the time of sale.
The asset acquisition value is credited and depreciation is debited because you no longer own the asset.
An Accounts receivable balance is recorded against the company that purchased the asset.
The main account value on the free text invoice line comes from the fixed assets posting profile for Disposal - sale. The following section examines where the other accounts and values in the voucher come from.
Though you select the SLSL asset book for the sale, the T_150_SLLR asset book is listed as a Derived book of SLSL for Disposal - sale. This listing indicates that you need to post a sale of a fixed asset in book T_150_SLLR whenever the sale is posted for asset book SLSL.
Review of postings
The following sections review the postings that occur in the asset book.
Asset books/derived books
Four books are included in the fixed assets setup. The fixed asset for this example records transactions against all four books. To view the asset books for a fixed asset, select the Books menu item on the Fixed asset list page or Details page.
Two books aren't posting to the ledger. The SLSL book posts to the Current layer, and the T_150_SLLR book posts to the Tax layer. Therefore, postings occur to both layers.
The books are set up so that postings to one book also post to the books that are listed as derived books. The example in this unit posts to the SLSL asset book and the derived books. The screenshot in the next section shows transaction postings.
The system records Acquisition and Disposal transaction types in the T_150_SLLR book when you post them to the SLSL asset book.
The system posts depreciation with individual postings to each asset book. A free text invoice post to the SLSL asset book posts to the Current posting layer and also posts to the Tax layer for asset book T_150_SLLR.
Fixed asset posting profile - Ledger account tab
To view the fixed asset posting profile, go to Fixed assets > Setup > Fixed asset profiles.
Sale
The sale uses the settings for Disposal - sale on the Ledger accounts tab of the posting profile.
| Debit | Credit | Account | Reason |
|---|---|---|---|
| 9,000.00 | 801100 | Selling price | |
| 9,000.00 | 130100 | AR |
Catch-up depreciation
You can record depreciation for the final days in the final month for which the fixed asset was in your books by specifying Depreciation accounts on the Ledger accounts tab.
| Debit | Credit | Account | Reason |
|---|---|---|---|
| 1333.36 | 180200 | Depreciation, final period | |
| 1333.36 | 607200 | Offset |
Fixed asset profile - Disposal tab
The Disposal tab of the Fixed asset profile lists other accounts that you might need when you sell or scrap an asset. Make sure that you select Sale in the dropdown list that appears above the grid.
Net book value
The first account that your sale uses is the Net book value entries account. The system credits the net book value of the asset to remove the asset from the ledger. This example is another case where the main account and offset are the same account. Though these entries are posted, they offset one another. The net book value is already reduced by the final depreciation entry that's made when the asset is sold.
| Debit | Credit | Account | Reason |
|---|---|---|---|
| 9,000 | 801100 | Reduce net book value | |
| 9,000 | 801100 | Offset |
Acquisition cost
Debit the original acquisition cost by using the Sale - Acquisition entries on the Disposal tab.
| Debit | Credit | Account | Reason |
|---|---|---|---|
| 10,000.00 | 180100 | Acquisition value | |
| 10,000.00 | 801100 | Offset |
The system combines the offset for original acquisition and net book value into a single debit entry of USD 19,000.00. This voucher is the original acquisition voucher. The acquisition originally debited the 180100 account. This account is now credited.
Depreciation
Next, you debit the depreciation expense for previous and current years by using the Depreciation entries on the Disposal - sale FastTab.
| Debit | Credit | Account | Reason |
|---|---|---|---|
| 2,666.72 | 180200 | Depreciation (one month) | |
| 2,666.72 | 801100 | Offset |
The following table shows the accumulated depreciation for one month.
| Debit | Credit | Account | Reason |
|---|---|---|---|
| 1,333.36 | 180200 | Accumulated Depreciation | |
| 1,333.36 | 801100 | Gain & Loss - Disposal of Assets |
Fixed asset status
The fixed asset status changes to Sold on the date that you post the free text invoice. The sales value displays on the Asset book page. You can display the asset books by selecting the Books menu item on the Fixed assets page.
Fixed asset disposals report
The Fixed asset disposals report shows the sale. Run this report from the Fixed assets module by selecting Inquiries and reports. Select Transaction reports and then select the Fixed asset disposals menu item. Each asset book records its own values, and you should view each line separately rather than the total.