Transaction Type for Registering Sale of Machinery with Free Text Invoice for Fixed Assets
Question
You are the accounts receivable manager of an organization.
The organization recently sold machinery to a customer.
You need to register a transaction for the sale of the machinery by using a free text invoice for fixed assets.
Which transaction type should you use?
Answers
Explanations
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A. B. C. D.D.
In this scenario, as the accounts receivable manager, you are responsible for recording the sale of machinery to a customer. To register this transaction, you need to create a free text invoice for fixed assets. A free text invoice is a document that can be created for any sales transaction where there is no predefined price or quantity.
When creating a free text invoice for fixed assets, you have to select the appropriate transaction type to ensure accurate accounting of the transaction. The four transaction types mentioned in the options are:
A. Acquisition: This transaction type is used when a new fixed asset is acquired by the organization. It involves recording the cost of the asset, including any expenses related to its acquisition, such as delivery charges, installation fees, and taxes.
B. Value adjustments: This transaction type is used to record any changes in the value of an asset, such as increases or decreases in its market value, due to factors such as inflation, wear and tear, or obsolescence.
C. Depreciation: This transaction type is used to record the periodic decrease in the value of an asset over time due to its use, wear and tear, or obsolescence. Depreciation is recorded to accurately reflect the current value of the asset on the balance sheet.
D. Disposal: This transaction type is used when an asset is sold, scrapped, or otherwise disposed of by the organization. It involves recording the proceeds from the sale or the cost of disposal, as well as any gains or losses associated with the disposal of the asset.
Based on the scenario provided, the appropriate transaction type to use for the sale of machinery by using a free text invoice for fixed assets would be D, Disposal. This is because the machinery is no longer owned by the organization and is being sold to a customer, which means it is being disposed of. By using the disposal transaction type, you can accurately record the proceeds from the sale and any gains or losses associated with the disposal of the asset.
