Depreciation accounting is an important view of any business, especially when you use assets such as vehicles, machinery, or office equipment. Whether you’re seeing to Download QuickBooks Desktop or QuickBooks Online, it’s important to set up and record depreciation properly. In this blog, we will explain how to Set Up, Record & Calculate Depreciation in QuickBooks Desktop & Online in detail.

What is depreciation?

A fixed property’s value is gradually expensed annually over the course of its useful life using the accounting technique known as depreciation. When you purchase an asset, its cost is not expensed all at once, but its value is expensed over the years.

Common Fixed properties:

• Computer systems
• Furniture & Fixtures
• Vehicles
• Buildings
• Machinery

The Set Up Depreciation in QuickBooks?

Although depreciation is not computed by QuickBooks, it can be manually recorded through journal entries.

How to Record Depreciation in QuickBooks Desktop?

Create the Depreciation Expense Account, after that go to the list and select the account from the chart of accounts, then click on new. Select Expense and Save with a Depreciation Expense Account name. Then, to create the Accumulated Depreciation Account, go to the Chart of Accounts and select the Fixed Asset account. Save it with an Asset account name.

For the Record, the Journal Entry goes to the company and makes a journal entry. After Debit Depreciation Expense and Credit Accumulated Depreciation, add description & date, & Save it. You can also check the QuickBooks Online Certification.

How to Record Depreciation in QuickBooks Online?

Open settings and go to the chart of accounts, then create an Expense Account for Depreciation. After that, create a Fixed Asset Account for Accumulated Depreciation and add the journal entry. Click on the Journal entry after selecting the new tab. After debit Depreciation Expense & Credit Accumulated Depreciation, Enter Date, Asset Details, and Memo, & Click on Save. It is best practice to maintain separate depreciation tracking for each asset.

How to calculate depreciation?

Following the IRS Guidelines of the USA, you will have to attach to the Modified Accelerated Cost Recovery System (MACRS). In QuickBooks, you can do depreciation manually, or you can outsource an accountant or even employ a depreciation calculator.

Common Methods:

• Straight-Line Formula

• Method: (Cost – Salvage Value) / Useful Life

• Declining Balance Formula

• Method: Book Value × Depreciation Rate

The Key Recommendations

• To keep an asset register, note each asset’s acquisition date, cost, lifespan, and salvage value.
• Record depreciation monthly: make financials accurate from Regular journal entries.
• Check Tax Compliance: It is necessary to claim depreciation as per the IRS rules.
• Take Guidance from an Accountant: For complex assets or special depreciation schedules, it is advisable to seek professional advice.

QuickBooks Tools for Depreciation Tracking

If you want accurate depreciation tracking, there are a few third-party tools you can use that integrate with QuickBooks.

1. Fixed Asset Manager (QuickBooks Desktop)
2. Asset Manager Apps for QuickBooks Online

For instance, Sage Fixed Assets, NetSuite Fixed Asset Management, etc.

Conclusion

Understanding depreciation properly and recording it perfectly in your QuickBooks is vital to the financial health of your business. Whether you’re using QuickBooks desktop or online, you can make your accounting RIS compliant by manually making depreciation entries.

FAQs

• Does QuickBooks do automatic depreciation?

No, QuickBooks does not do automatic depreciation. You have to create journal entries manually.

• Can I set the useful life of an asset in QuickBook?

No, not directly, but you can manually keep the asset details for reference.

• Can depreciation be recorded without an accountant?

Yes, if you have basic accounting knowledge, then you can do journal entries manually. For complex assets, it is better to seek help from an expert.

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