How to Account for Selling Used Cars by a Company?
2 Answers
Debit Fixed Asset Disposal, Debit Accumulated Depreciation. Debit Fixed Asset Disposal, Credit Tax Payable/Value Added Tax Payable, Credit Bank Deposit. Debit Bank Deposit, Credit Fixed Asset Disposal. Debit Non-operating Expense/Fixed Asset Disposal, Credit Fixed Asset Disposal/Non-operating Income.
I've been in the automotive industry for over a decade, and the accounting treatment for selling used cars by companies is quite nuanced. When selling a vehicle, you first need to look at its original value and accumulated depreciation to calculate the book value. If the actual selling price is higher than the book value, the excess is considered company income and subject to corporate income tax; if it's lower, it counts as a loss, which can be used to offset taxes. Don't forget to issue a VAT invoice, with the specific rate depending on whether the company is a general taxpayer or a small-scale taxpayer. Routine vehicle operating costs like maintenance and insurance should be clearly recorded in the accounts. In practice, it's advisable to hire a professional accountant to handle this—don't skimp on these costs, or you'll face big troubles during tax inspections. Additionally, take photos before and after the sale, and keep the contract and transfer documents to avoid future disputes.
