Last August, I introduced you to the then-newly released Fixed Asset feature in QBO Advanced. Now, we want to look a little more closely at some of the details.
Accounting principles tell us that buildings, property, furniture, fixtures, machines, equipment, and vehicles are all fixed assets that should always be recorded at their original (book value) cost. And while the fair market value of some of these assets may increase over time, the cost basis principle precludes their value from increasing.
In addition, because most of these fixed assets have a limited life expectancy associated with their usefulness, and they eventually become obsolete over time, the accounting principle known as matching mandates that these fixed assets be depreciated.
Depreciation methods vary, and depreciation can be reported significantly differently between book and tax reporting.
I will mention here that property (land) is an exception to the above. Land is neither depreciated nor appreciated when a business holds it; however, most improvements made on the land will follow standard fixed assets methodology.
QuickBooks Online Advanced has simplified the tracking and management of fixed assets. Users can track and record the depreciation of their fixed assets, making it easier to maintain accurate financial records.
The QuickBooks Online Advanced Fixed Asset feature uses information about an asset's purchase date and useful lifespan, plus a specified depreciation method to calculate the asset's depreciation. The feature can be used to track both new fixed assets as well as existing fixed assets with previously accumulated depreciation.
The feature supports the most frequently used depreciation methods, including Straight-line, 150% Accelerated, and Double-declining depreciation. Users can run various reports that identify each asset, its depreciation schedule, and the accumulated depreciation for those assets.
Best of all, once configured, the feature will automatically record the monthly depreciation in the users' books.
Adding a New Fixed Asset in QBO Advanced
1) Go to Advanced accounting, then select Fixed assets.
2) Select Add an asset.
3) Fill out the details for your fixed asset:
- Purchase price
- Useful life
- Depreciation method
- Depreciation start date
- Accumulated depreciation if you're adding a fixed asset that has already started depreciating. (See the section below on Existing vs. New Fixed Assets for more information on this.)
- Asset account
- Depreciation expense account
- Accumulated depreciation account
4) If you're adding a fixed asset that has already started depreciating, select Calculate so QuickBooks can calculate the accumulated depreciation for your chosen parameters.
5) Select Save.
Add Multiple Fixed Assets
Another great function of the QBO Advanced Fixed Asset feature is the ability to add multiple Fixed Assets using a spreadsheet-like entry form.
1) Go to Advanced accounting, then select Fixed assets.
2) Select Add multiple assets.
3) Select any of the fields on line 1 to start. This is your first fixed asset.
4) Enter the details for the asset in the fields or copy from an existing spreadsheet:
- Purchase price
- Useful life
- Depreciation method
- Depreciation start date
- Accumulated depreciation if you're adding a fixed asset that has already started depreciating. (See the section below on Existing vs. New Fixed Assets for more information on this.)
- Asset account
- Depreciation expense account
- Accumulated depreciation account
5) Repeat steps 2 and 3 to enter as many fixed Assets as you need in separate lines.
6) When you're finished, select Save. QuickBooks will import your assets to the fixed Assets page.
Existing vs. New Fixed Assets
We've just looked at two methods to add new fixed assets. In those two methods, we briefly discussed entering 'accumulated depreciation' for fixed assets that had already recorded depreciation.
When you enter such an asset, QuickBooks computes the depreciation in the usual way, and that amount can be different from previously computed depreciation values. If there's a difference, manually enter an adjustment entry to match your books and the fixed assets because the accumulated depreciation amount has to match the amount calculated by QuickBooks for the schedule to be calculated correctly.
Depreciation Start Date, Schedules, and Post Dates for Fixed Assets
QuickBooks automatically creates the depreciation schedule. If an asset's depreciation start date is in the first half of the month, depreciation is computed as of the first day of that same month. If an asset's depreciation starts in the second half of the month, depreciation begins on the first day of the following month.
Regardless of how the depreciation is computed, depreciation computed for any month is posted on the 1st day of the following month for which it is computed. For example, if the depreciation starts of a fixed asset on the 1st day of April, the depreciation will be posted to the financials on the 1st day of May. If the depreciation start date for a fixed asset is on the 16th day of April, the actual depreciation begins on the 1st day of May and will initially be posted on the 1st day of June.
Viewing the Depreciation Schedules for Fixed Assets
1) Go to Advanced accounting, then select Fixed assets.
2) Find the asset for which you want to see the schedule and transactions and select View.
3) Go to Schedule and select the arrow for each year to view the schedule in detail.
4) Select the month to view any posted transactions.
Select any year in the depreciation schedule to view the monthly schedule for that year.
QBO Advanced Users can run a Fixed Assets report showing the depreciation of all fixed assets by selecting See report from the Fixed Assets tab. This report can also be run from the Reports center.
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