Accounting for Depreciation in QuickBooks


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Can someone point me to some examples of how to handle depreciation in QuickBooks (2009)?

To give an example, I buy a computer for $2000 in 2009. I choose "Equipment" as category. I duly report my assets to my accountant at tax time and she works her magic to make sure the depreciation is credited to me for that year. I think I need to do something in Quickbooks after the fact to take this into account. Otherwise, my Balance Sheet will not be right at the end of the year. My Income Statement (P &L) is correct.

I'd rather be able to take care of this myself. I hired a QuickBooks bookkeeper to help me out one year. She recorded some items as equipment and promised she'd show me how to reconcile the items after tax season. She never did.

Honestly, it seems much simpler to list all equipment as expenses (office supplies, computer extras, etc.) but I'm told this is illegal. It probably has something to do with the differenc between taking the deduction all at once versus over a few year. I'm not actually looking to cheat, just keep things simple:)
Any links, tutorials would be much appreciated.

Thanks,
Dave

Tax Bookkeeping

asked Aug 16 '11 at 06:27
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Dave
160 points

1 Answer


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I am not a Quickbooks person, but I have prepared quite a few business tax returns (corporations, partnerships, etc.). Only about 2 or 3 of my clients in 25 years have ever done their own depreciation. Most of the time, people put the equipment they buy somewhere on the profit and loss statement and I move it to an asset account and figure the depreciation.

If you really want to do the depreciation, then here is a quick rundown. Once the equipment is in an asset account, depreciation can be recorded by a journal entry. For federal depreciation purposes, the most common asset categories are 7 year property and 5 year property. In the year you put the assets in service, you take 20 percent for 5 year assets and 14.89 percent for 7 year assets. Your accountant can give you later years. Also, in the first year, you can take 50% bonus depreciation for new assets or write the whole thing off with Section 179. I think this is why most people just leave the whole business to their accountant.

Anyway, once you decide what amount you are going to use, you make a journal entry putting that amount into an expense account as a debit (positive in most systems) for Depreciation Expense and a credit into what's called a contra-asset account for Accumulated Depreciation. A contra-asset account shows up on the balance sheet, in this case usually under the assets and its balance will be negative. This contra-asset account should reflect the total amount of depreciation for all years for the assets shown.

I hope you can see how to do this in Quickbooks. If you decide to pass on the depreciation part, it would be helpful to you if you at least put the cost of the assets into an asset account rather than an expense account.

answered Aug 16 '11 at 08:53
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Jack Rodenhi
607 points
  • Jack, Thanks for the info. I think I wasn't too clear. I am not interested in figuring out how to do depreciation; the accountant does that. She figures out the percentages, the years etc. My understanding though, is that if I want to keep my quickbooks up-to-date, I must make some entries, after tax season when she gives me the info she used (percentages, years, etc.) Otherwise, I will show more assets than I actually have. My accountant indicated it's not a huge deal, as it's the profit and loss statement that is mostly used for tax purposes. Still, I'd like to have everything perfect. – Dave 9 years ago
  • I usually provide my clients with a "summary" journal entry after we finish the tax return. Because the income statement is closed out after each year the journal entry has only balance sheet accounts on it. Anything that would have affected the income statement ends up in Capital or Retained Earnings. I do a spreadsheet where, in 3 columns, I list the amount in the account when I got it, the adjusted amount and the difference. The difference becomes the journal entry to bring the client's books into sync with mine going forward. – Jack Rodenhi 9 years ago

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