Let’s learn how to set fixed assets to track depreciation in QuickBooks desktop for Mac.
There are some ways to track fixed assets and depreciation.
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What are Assets?
The resources with economic value which is owns or control with the expectation that it will provide future benefits to all individual corporation or country is known as assets. Assets are reported on company’s balance sheet. It is bought or created to increase the benefits and value of firm operation. Assets is something that generate cash flow, improve sales, reduce expenses regardless of manufacturing equipment or patent. Company assets are the things which your company owns. There are two types of assets:
- Current Assets: The assets which you want to convert within a year is known as current assets. Current assets include cash in hand, cash in your money and saving accounts, and the money which was given by the customers to the company.
- Fixed Assets: At the time of normal operations, you don’t expect that your assets will convert to cash in one year those types of assets are known as fixed assets. Fixed assets are very important for the operations for the business-like computers, registers, cabs, trucks etc.
About Depreciation and Accumulated Depreciation in QuickBooks
The decline value of the physical assets is known as depreciation whereas the cumulative depreciation of the assets up to single point in life is known as accumulated depreciation.
The cost of using tangible assets with the benefit gained over its useful life is known as depreciation. There are types of depreciation like straight line etc. The sum of all depreciation which are recorded as assets to a specific date. All the accumulated depreciation are minus from the value of assets. After all depreciation the assets value is refer as salvage value.
Rules of the depreciation
There are no rules that how quickly and exactly you must depreciate your tangible asset. Following are the some important rules of the depreciation:
- Plant and Machinery
- Fittings and Fixtures
- Motor Vehicles
- Equipment and computers
Accumulated Deprecation is also known as Contra Assets Account. It is a natural balance which is credit that reduces overall asset value. The carrying value is the net of assets account and accumulated depreciation.
The value that remains on balance sheet after which all its deprecation which is accounted until the asset is disposed or sold. This type of value is known as salvage value.
It totally based on the expectation of the company that what the company receive in exchange of assets. The assets estimated salvage value which is a important component in the calculation of depreciation.
Type of Asset Which can be Depreciate
The types of assets which can be depreciated it depends on the IRS set guidelines. It must need to meet following criteria:
- You own it.
- You use it in order to produce income.
- You can determine its useful life.
- You expect it to last more than one year.
Some of the examples of assets depreciated by the small business include:
- Real Estate
- Office Furniture
The table which shows that how much your assets will be depreciated over the year is known as depreciation schedule. It includes the following information:
- Asset Description
- Purchase date
- Price for the asset that you paid
- Expected Useful life
- Method use for depreciation.
- Salvage Value
- Amount which is deductible in the current year i.e depreciation amount.
- The cumulative depreciation amounts.
- The net book value of the assets.
What are the Depreciation Methods in QuickBooks
The following are the depreciation method which company use in order to depreciate assets:
- Straight-Line: It is the common method of depreciation in which the value of fixed asset is reduce over the useful life.
- Declining Balance: It can be defined as accelerated depreciation system of recording the larger depreciation expense during the earlier year of an assets of useful life and recording of smaller depreciation expense during the asset later year.
- Double-declining Balance: It is an accelerated depreciation method which count an expense more rapidly.
- Units of Production: The method of calculating the depreciation of the value of an asset over a time is known as unit of production.
- Sum-of-years Digits: It is the accelerated method of determining an asset expected depreciation over a time.
Setting up of Asset Account to Track Deprecation in QuickBooks
Follow the following steps in order to setting up of assets in order to track deprecation.
- First you have to create a fixed asset account for all the assets which you want to depreciate. The account can represent single assets or group of related assets.
- The type of account is the fixed assets.
- Now you have to give name to each account which indicates for which assets the account is. The name of the account which is useful in its tracking. For example, truck, office, furniture, and computer.
- Leave the opening balance at 0.00.
- Add two subaccounts for each of the asset’s account which you created. The two-account track the assets differently. One of the subaccounts tracks the cost of assets and the other one tracks the accumulated depreciation.
- Every main account has two sub accounts.
- You can name the account in following manner:
- First subaccount can name as cost.
- Second subaccount can be name as accumulated depreciation.
- In the case of subaccount, you have to enter the original cost of the assets in the opening balance field. You have to enter the date of the purchasing of asset.
- In the case of Accumulated depreciation, you have to type 0.00 in the opening balance in case if you have assets after QuickBooks start date. In case if you have assets before the start date then you have to enter the accumulative deprecation of the assets AS OF the start date. You have to enter this amount as a negative number.
- In order to track depreciation of the assets you have to create expense account. You can give name to the account is depreciation expense.
How to Enter the Depreciation in QuickBooks
It is the difficult process to determine the amount of depreciation. Following are some steps in order to figuring the actual depreciation amounts.
- First you have to go to the list option in QuickBooks.
- From the drop-down menu of list you can select the Chart of Accounts.
- Now you have to select the subaccounts that will track accumulated depreciation for the asset you are depreciating.
- Click on the action pop up menu and from the drop-down menu of pop-up you have to select use register option.
- Now in the bottom of register you have to enter the transaction. There are two steps for it:
- You have to enter the depreciation amount as decrease in register.
- Enter the expense account which you set up to track depreciation in the account field.
QuickBooks subtract the depreciation amount from the current value of the asset, in the main fixed asset. The account which tracks depreciation, QuickBooks enters the depreciation amount as an increase in the company depreciation expense.
Now you came to know that assets and depreciation does not need to be complicate. You just have to record exactly what you have purchased. You have to work with the accountant in order to understand the useful life of the item. Now you can apply proper depreciation values while preparing your accounts.
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Frequently Asked Questions (Faqs)
How can I Post Depreciation in QuickBooks online?
The following are the steps in order to set up a depreciation account:
• First you have to go to settings.
• Then click on the chart of accounts from the setting.
• Now you have to select the new tab in order to add the new account.
• From the drop-down menu of account type you have to select other expenses.
• Now from the drop-down menu of detail type you have to select depreciation.
• Give the name to account like asset depreciation.
• Now hit the save button in order to save the changes and then click on the close tab in order to close the settings.
What Count is Accumulated Depreciation in QuickBooks?
Contra Account, No accumulated depreciation is a contra account. On the balance sheet it lowers the fixed asset items.
How can You Enter the Accumulated Depreciation?
Depreciation journal entry is to debit the depreciation expense account and credit the accumulated depreciation account. The Expense account will appears in the income statement and the accumulated depreciation account appears in the balance sheet as a contra account which reduces the amount of fixed assets.
Do You Add Accumulated Depreciation?
Accumulated depreciation is present in the balance sheet below the line for related to capitalized assets. The amount of depreciation expense recorded in the current period is increases over a time by adding accumulated depreciation balance.
How can I Amortize in QuickBooks Online?
Following is the process of amortization of debts of an expense:
• Select +New tab, in order to add new account.
• Now click on the expense tab.
• From the drop-down menu of payee. Select customer.
• From the drop-down menu of payment account, you have to select account.
• Now select the date of payment on which date you have to pay for the asset.
• Now select the method of payment that what is the mode of payment like credit card, cash etc.
• Now enter the reference number. Ref no. is very useful in order to track the account from the list.
How can I Record Depreciation in QuickBooks?
Steps to be followed in order to enter the depreciation:
• Select the chart of accounts from the list options.
• Now click for the subaccount which tracks accumulated depreciation for the assets you are depreciating.
• From the action pop up menu use have to select use register.
• In the bottom of the register enter the transaction.
• You have to enter the depreciation amount as a decrease in register.
How can I Enter Fixed Assets in QuickBooks Online?
By the following steps you can enter fixed assets in QuickBooks Online:
• Click on the accounting menu and then choose the charts of the accounts from it.
• From the upper right corner click on the new tab.
• Click on the account type option and from the drop-down arrow click on the fixed assets or other assets.
• Click on the detail type option and from the drop-down arrow click on the nearly describes the assets.
• Now enter the name of the account.
How can I Calculate Monthly Accumulated Depreciation?
Following are the steps in order to calculate monthly straight-line depreciation:
• First you have to subtract the asset’s salvage value from the cost in order to determine the amount which can be depreciated.
• You have to divide the above amount by the numbers of year in the asset useful life span.
• In order to have the monthly depreciation for the asset you have to divide the value by twelve.
How to Post Depreciation?
Following is the accounting procedure for posting depreciation:
• Determine the amount of depreciation for the account.
• From the yearly depreciation you have to debit the depreciation expense.
• From the yearly depreciation you have to credit the accumulated expense.
• Any changes for a account in the depreciation estimates positively.
What are the Disadvantages and Advantages of Straight-line Method of Depreciation?
Following are the limitation of the straight-line method of depreciation:
• The actual use of the asset is ignored.
• The loss of interest which is received for the amount in vested in the asset is no consider.
• It does not take into consideration that the depreciation of the asset will be more as it becomes old.
Following are the benefits of the straight-line method of depreciation:
• It is easy to apply and simple to understand.
• By using this method, the value of asset is completely written off.
• In the end of the useful life the asset value can be made zero value.
• As the equal amount will be charged every year so it is easy to compare profit.
What are the Which are to be Consider for Providing Depreciation?
There are main four factors which are to be consider while calculating depreciation account:
• Asset Cost.
• The salvage value of the asset.
• Estimated useful life of the asset.
• Obsolescence must be considered which will determine an asset useful life and it will affect the calculation of depreciation.