Expert: Arthur Naman - 2/23/2009

Question
Mr Arthur, thank u very much for for helping out with my previous questions. I am a bit unsure about how to journalize the sale of land.The two questions are

1.) How do i record the sale of land held as a fixed Asset and sold later assuming the firm is in the business of buying and selling land.

2.) How to record the sale of land held as stock.

3.) What happens if the land is sold in peices to clients

Answer
The purchase of land is the purchase of an asset. Credit cash and debit a fixed asset account - land.

#1 - The sale is simply credit cash, debit the fixed asset - land account and debit or credit a gain on sale of land account.

The response to question #2 is not clear. What do you mean by "stock"? The answer is probably the same as in #1

The answer to #3 is the same as #1 - it does not matter whether or not the sale is an entire piece or parcel of land or only a factional interest or just a piece of the total.

Typically land is not treated as inventory as would be the case if the company sells a product. Thus land being held for investment, land used to locate a building on, and most other purchases of land are normally treated the same as described above.

p.s. If you will have a bunch of questions would you like to use instant messaging software like skype or some kind of tutoring software?

Out of curiosity where are you located and what type of business are you in. Are there other says I can help with your accounting or bookkeeping questions.