Trade in on a new fixed asset

If the traded asset was expensed in the former business, then you would reduce the value of the new fixed asset. It would be the proper way to handle the transaction.
If it was not expensed, then I would take the reduction in cash allocated to the fixed asset trade to equity or to a "Due to Owner" account.

How do I record a trade in on a new fixed asset purchase?
What do you mean "Due to Owner"?

"Due to Owner" is a liability account to catch the dollars that an owner deposits to the business or to help record the expenses that an owner pays on behalf of the business.

Hi Robert! I was looking for some assistance re: trading in a fixed asset when I came across your post! AWESOME example! Can you help me out with the following, pretty please?

My client has a 2006 Chevy that he traded in on a 2008 Chevy. Here is how my info is currently set up:

2006 Chevy P/U - Fixed Asset - Balance $17,726.10 (which was his balance when I first created his set of books.)

The balance when he traded it in was $16,238.92 and I have this acct set up as a LTL acct. I transferred that amount from the 06 Chevy LTL acct to the new 08 Chevy LTL acct. I created a JE to debit the 08 Chevy Fixed Asset for $15,031.77 for the acct opening balance and credited the 08 Chevy LTL acct. The transfer of the $16,238.92 and the JE for the $15,031.77 together, give me the total amount financed, $31,270.69. (Yes, this guy was seriously $16,238.92 upside down...:-/ ... LOL) So,... I am cool with my new 08 LTL account and have "zeroed-out" the 06 LTL by the transfer. But now, how do I get rid of the $17,726.10 from the original entry that I made to the fixed asset acct? If you could assist me with this, I would GREATLY appreciate it!

Thank you, Thank you, Thank you!
Shannon :-)

I assume that you did not post any vehicle depreciation in the company books. If that assumption is correct then the attached journal entry is "almost" correct. If your client added cash to this transaction in the form of a check, you will want to add a line to debit the checking account for the cash. There are title fees and lien fees that should be entered as a line item in the transaction to debit "Licenses & Fees" or "Automobile Expense". In any case these lines should be inserted before the final line as QB will calculate out the value of the new vehicle.

Note that I re-used the Note Payable account for the loan. I like re-using LTL accounts for renewal notes or for superceding liabilities because it allows me to easily find the old transactions. I also like to state the term, interest rate and payment amount in the memo entry of the new loan. It makes it easy to find.

You Rock!! Thank you soooooooo much!