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This is very simple but I'm having trouble figuring out how to account for the sale of an asset, in double-entry bookkeeping, in a way that shows the net proceeds going to cash AND recorded as a capital gain.

Assume you have an asset worth $1000. When you sell the asset you enter a transaction that reduces the asset value to zero and increases your cash balance to $1000. What is the corresponding transaction that shows the capital gain? Clearly one side is an increase in an income account (Capital Gains) but where does the balancing entry go?

I found this question but it doesn't seem to address my simple situation.

Here's some detail:

Transaction          Asset     Cash     CapGain     ????
=================  ========  ========  ========  ========
Initial Balance       1000       

Record Cap Gain      -1000               +1000
Cash                           +1000               -1000

     or expressed the other way

Cash                 -1000     +1000
Record Cap Gain                          +1000     -1000
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Ex Umbris
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1 Answers1

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Asset is recorded, at value that is its basis. So when you sell it, you credit the asset with the sale price (debiting cash), and then debit it back to 0 crediting the capital gains account.

Pay attention: the asset should be booked at its basis value. Depreciation reduces the basis (you should also have a depreciation account as an expense).

littleadv
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