How to Use QuickBooks to Calculate and Track Depreciation?

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If your business purchases machinery and equipment that’s used for several years, you would like to track depreciation expenses within QuickBooks.

What is Depreciation?

Depreciation enables you to display the value of a costly asset over time. For instance, a dentist buys specific machinery for an important expense. This has used over five years to depreciate the price of that purchase monthly over that entire five-year period.

Spreading out the value of an oversized expense over the life of that asset is significant to create sure that your bookkeeping records properly accommodate that expense.

If you were to log that expense when the purchase has been made. This might significantly impact your accounting records and should even have negative tax and legal consequences for your business.

Depreciation and accumulated depreciation

Depreciation has that the decline within the value of a physical asset while accumulated depreciation is that the cumulative depreciation of an asset up to one point in its life.

Enter Depreciation

Important: Determining the amount of depreciation to deduct is often a complex process. And therefore the IRS rules on the topic change often. Ask an accountant for help in figuring actual depreciation amounts.

  • Go to Lists, and then select Chart of Accounts.
  • Select the sub-account that tracks accumulated depreciation for the asset you’re depreciating.
  • Select Use Register from the Action pop-up menu.
  • Enter the transaction at the lowest of the register:
  • Enter the depreciation amount as a decrease within the register.
  • In the Account field, enter the expenditure account you set up to track depreciation.

How to Track Depreciation within QuickBooks?

There are several different steps require to appropriately track depreciation in QuickBooks.

  • Once the purchase of the machinery or equipment has been created, you would like to record that as an asset within QuickBooks instead of an expense.
  • This asset would then have shown on the record within QuickBooks.
  • You can calculate the depreciation expense that ought to be applied monthly using a few different methods.
  • Discuss specific depreciation schedules and your accountant, but using a straight-line depreciation schedule means the expense is spread evenly, monthly, across the asset’s lifetime.
  • To easily document the depreciation expense within QuickBooks, you’ll be able to use memorized transactions.
  • Memorized transactions within QuickBooks enable you to configure an expense that’s entered into QuickBooks monthly over a particular amount of your time.
  • This ensures that the depreciation expense has entered appropriately every month without having to recall entering it since it doesn’t show up on your bank account.

If you’re not using a straight-line depreciation schedule, work along with your accountant to define the depreciation schedule then consider configuring those expenses within QuickBooks, all directly, as transactions into the longer term. This accomplishes a similar goal because of the memorized transaction feature above.  So you have got all of the depreciation expenses logged appropriately within QuickBooks.

What are Assets?

Company assets are the items that your company owns.

Here’s the difference between two kinds of assets:

  • Current assets: These are the assets you’re likely to convert to cash within one year. They include the cash you’ve available, the cash in your checking and savings accounts, and the money your customers owe your business.
  • Fixed assets: These are the assets you don’t expect to convert to cash during one year of normal operations. A fixed asset is usually something necessary for the operation of your business—like a truck, cash register, or computer.

Note: In the main fixed asset account, QuickBooks subtracts the depreciation amount from the asset’s present value. Within the account that tracks depreciation, QuickBooks enters the depreciation amount as a rise to your company’s depreciation expense.

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