Record the Transaction: The company records the sale of the land in its accounting records (journal entry) by debiting (increasing) the cash account by the amount it received. It also debits any costs associated with the sale. It credits (decreases) the Land account for the land's book value.
How is land treated in accounting?
Because land is typically the least liquid asset a business owns, it's classified as a fixed asset on your balance sheet. A balance sheet is one of the three major financial statements that a small business will prepare to report on its financial position.
How do you record a disposal of an asset?
- Calculate the asset's depreciation amount. The first step is to ensure you have the accurate value of the asset recorded at the time of its disposal.
- Record the sale amount of the asset.
- Credit the asset.
- Remove all instances of the asset from other books.
- Confirm the accuracy of your work.
How is land recorded in accounting?
Land, buildings, and equipment are reported on a company's balance sheet at net book value, which is cost less any of that figure that has been assigned to expense. Over time, the expensed amount is maintained in a contra asset account known as accumulated depreciation.
How do I record a sale of a property?
- Step 1: Credit the Property's Asset Account(s)
- Step 2: Debit the Mortgage Account.
- Step 3: Debit the Cash Account.
- Step 4: Record Selling Costs.
- Step 5: Clear Accumulated Depreciation.
- Step 6: Determine the Property's Book Value.