When your business pays for something that represents a loss in value over time of one or more fixed assets — assets that you don;t convert into cash during normal operations — you should record it as a depreciation. Things like equipment, furniture, office supplies, etc. are all depreciated expenses. While the process of may sound confusing, Quickbooks makes recording such expenses a breeze. For a step-by-step walkthrough on how to record a depreciation in Quickbooks, keep reading.
Before we begin, it’s important to note that each fixed asset in Quickbooks should be given its own parent asset account, which is found in the chart of accounts, along with two subaccounts. The first subaccount is used for the original purchase price of the respective item or expense, whereas the second subaccount is used for the accumulated depreciation.
To create a fixed asset account in Quickbooks, log into your Quickbooks account and access Lists > Chart of Accounts > Account > New. From here, choose Fixed Asset > Continue > enter a name for the new fixed asset account and click “Save & New.” Next, choose the subaccount of from the drop-down menu, followed by selecting the parent company account. You will then need to click “Enter Opening Balance,” at which point you can enter the purchase date in the “as of” field, followed by OK. When you are finished, click Save & New.
To record a depreciation, simply access the Lists menu > Chart of Accounts > double-click the asset’s Depreciation subaccount > enter the respective date in the date field > enter the depreciation amount in the Decrease column > select the depreciation expense from the Account drop-down menu > and click Record. Congratulations, you’ve just recorded a depreciation in Quickbook!
Keep in mind that after you have recorded the depreciation for a fixed asset, your chart of accounts will show the asset’s new value in the parent asset account. This means when the asset’s lifetime comes to an end, the parent asset’s subaccount will be equal. Furthermore, the value of the parent asset account will revert back to zero. According to Intuit’s own website, the balance in your asset account will transfer over from year to year, with expense accounts being reset to zero at the start of a new year.
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