Question

If an equipment is originally purchased on April 1st for $3,000 and got sold for $1,500 on Nov 1st same year, do you record the journal entry as per below:

Cash	1,500
Accumulated difference	875
Loss on sales of equipment	625
Equipment		3,000

Answer 1

Yes, the same journal entry is prepared.

Equipment is an asset account so it always has debit balance so when it is sold, it will be credited with its original purchase value, in this case, it is $3,000.

Depreciation is charged for wear and tear so depreciation that has been accumulated from several years or months is called the accumulated depreciation and it always has credit balance because it shows as a deduction from the equipment account so when the equipment is sold, the accumulated depreciation is debited to get the balance in it to zero.

When the equipment is sold less than its book value then the difference is called the loss on sale of equipment and this loss will always have debit balance, hence, it is debited.

Cash is an asset account so it always has debit balance so when cash is received, its balance increases, thus, it is debited.

Therefore, the given journal entry is correct.