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Recording and depreciating assets

Answer ID: 2705

Click on the desired link below:

How do I set up an asset?
How do I enter the loan for my asset?
How do I enter the loan payment for my asset?
How do I record the depreciation of my asset?
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To set up an asset account:

  1. Choose Company > Chart of Accounts.
  2. On the lower right click New.
  3. Click on Choose From All Account Types and then click Next.
  4. Select the type of asset and then click Next. *
  5. Select the detail type of asset (if none pertain select the closest and proceed) and then click Next.
  6. Name the account.
  7. For the question: Do you want to track the depreciation of this asset?, click Yes or No. (If Yes is selected the system will automatically create a Depreciation subaccount for the item).
  8. Fill in the original cost fields. (If recording the loan, please leave this blank.) 
  9. Click Finish.

* Consult with your accountant on what to select. Only certain types of assets will cause the depreciation question to populate.

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How do I enter the loan for my asset?

The following instructions are only the basics on how to set up loans for assets.  When making a purchase there are always many other things that must be taken into consideration, such as trade-in, down payment, fees, taxes, and so on.  You need to consult with your accountant to discuss how to account for these variables.

To handle a loan to purchase a new asset (car, truck, etc.) you'll need to set up a liability account.  If you were buying a truck, for example, you might call it "Loan - Truck."  Depending on the repayment time frame, choose either Current Liability (to be paid in full within one year) or Long-term Liability (to be repaid over more than one year).

To set up this account:

  1. Choose Company > Chart of Accounts.
  2. On the lower right click New.
  3. Click on Choose From All Account Types and then click Next.
  4. Select either Other Current Liabilities or Long-term Liability (depending on length of loan).
  5. Select the  detail type of Other Current liability or Long-term liability (a description is listed to the right of each option) and click Next.
  6. Name the account.
  7. Leave the Unpaid Balance blank.
  8. Click Save.

Now that you have this in place, you'll need to create a Journal Entry to record the amount of the loan to the proper accounts.

  1. Choose Banking > Journal Entry.
  2. For the first line under the Account column, select the new liability account.
  3. To the right of the liability account under the Credit column enter the amount of the loan.
  4. For the second line under the Account column, select the appropriate asset account.
  5. To the right of the asset account under the Debit column enter the amount of the loan.

Here's an example:

- Loan - Truck (liability account) - $ XXXX.XX (Credit)
- Truck (asset account) - $ XXXX.XX (Debit)

When you make a journal entry, the credits and debits must equal zero.  In the above example we are increasing, or crediting, the liability/loan account and increasing, or debiting, the appropriate asset account.

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How do I enter the loan payment for my asset?

To pay and amortize the debt of an intangible asset, please see our related KnowledgeBase article KB 2031, Does $QBO_Full_Name have an amortization schedule?

To record the payment for your loan:

  1. Choose Banking > Write Check.
  2. Choose the bank account you use to make payment.
  3. If you plan to print this check from QuickBooks Online, click to mark the option To be printed.
  4. For Pay to the Order of select your creditor.
  5. If this is a hand-written check enter in the Check # and appropriate Date.
  6. Under Amount, list the full amount of the payment (principal + interest).
  7. If you want to track both principal and interest, you need to list two accounts in the Account section below the check.  One line is for the loan liability account where you would enter the total principal paid as the Amount.
  8. The second line is for the interest expense account (if one is not yet set up see the following steps) and corresponding Amount of interest paid.
    Note: The amount on your check must equal the total of the lines listing principal and interest. For specific information on what accounts should be used, consult your accountant or bookkeeper.
  9. Click Save or Save and Print.

To set up an interest expense account:

  1. Enter a name in the account column below the check such as "Interest Paid for Loan" and press enter.
  2. Expense should be pre-selected; click Next.
  3. Select Interest Paid and click Next.
  4. Click Finish.

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How do I record the depreciation of my asset?

QuickBooks Online does not automatically depreciate fixed assets; instead, it's a manual process using journal entries.  We suggest that you consult the IRS publication on the topic of depreciation if you're going to try this yourself:  http://www.irs.gov/publications/p946/index.html

Note: You can make this process more automated by setting up specific journal entries on a time schedule. For more information about recurring transactions, see KB 1082.

To depreciate an asset:

First, set up a depreciation expense account (if not already created):

  1. Choose Company > Chart of Accounts.
  2. On the lower right click New.
  3. Click Choose From All Account Types and then click Next.
  4. Select Other expense and click Next.
  5. Select Depreciation and click Next.
  6. Enter desired name such as: Asset Loan Depreciation Expense and click Finish.

At the end of the year when you or your accountant have calculated the depreciation amount, enter the transaction:

  1. Go to the Banking tab and click Journal Entry.
  2. In the first line:
    • For Account select your depreciation expense account.
    • Under Debit list the amount of the depreciation.
  3. On the second line:
    • For Account select your Depreciation account for the asset.
    • Under Credit, list the amount of depreciation.
  4. Click Save.

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