QuickBooks Asia

How can I manage Fixed Assets in QuickBooks?

In QuickBooks Asia version, it does provide a Fixed Assets Item list for user to keep track of the Fixed Assets purchased. Personally, I do not like to use this Fixed Assets list provided by QuickBooks. I found that there is something crucial missing out from the Fixed Assets Profile – Depreciation information.

Most of the small businesses who cannot afford to have Fixed Assets tracking software will use a spreadsheet to record the Fixed Assets purchased with the depreciation schedule of the assets. Then, base on the depreciation value, they will record it in QuickBooks via a General Journal.

I do not like to use spreadsheet to track my Fixed Assets; partly, I am not good in spreadsheet’s formula.  I prefer to use QuickBooks to do all my accounting schedule rather than using a separate program.

How I use my QuickBooks to track the Fixed Assets?

I created two QuickBooks company files. I created one for my actual accounting and the other for my fixed assets tracking.

In the Fixed Assets company file, Chart of Account list, I will first create the main categories such as Computers, Furniture & Fittings, Office Equipment, Motor Vehicle, Machinery and Property. Then, I will enter the entire Fixed Assets name such as IBM ThinkPad T60 – 12345678, IBM ThinkPad T61 – 12345678 and Compaq nx9010, etc under the sub item of the main category.

Next, I will pass a General Journal to record the value of the asset cost. Example: I bought an IBM ThinkPad T60 (serial number: 12345678), on 1 Jan 2010, at $2,268. I will debit IBM ThinkPad T60 – 12345678 account for $2,268 and crediting Assets Purchase account (Cost of Goods Sold Account) for $2,268. Since this is not the actual set of financial account, so it does not matter if I were to use Cost of Goods Sold account for this transaction, I just need an account for my double entry.

You may consider adding the extra information such as location of the asset, who uses it and warranty information in the Description field of the account profile. This information will printed when you printed out the Account List report.

Then, create the Depreciation Expense account for Computer, Furniture & Fittings, etc in your Chart of Account list. This is to capture the depreciation of the individual asset.

How can I record monthly depreciation schedule of the asset?

From General Journal, credit IBM ThinkPad T60 – 12345678 (Fixed Assets type of account) for $63 ($2268 / 36 months) and debit Depreciation – Computers expense account for $63. In the General Journal Form, right-click and select Memorize General Journal.

In the Memorize General Journal wizard:

• Name: Com-IBM ThinkPad T60-12345678 (Note: you may have to shorten the name to fix into the name field. I added a ‘Com’ in front of the Memorized General Journal is to differentiate between Computers and other fixed assets such as Furniture & Fittings (FF)).
• Select ‘Standing Order’ radio button.
• How Often: Monthly
• Next Date: 28 Feb 2010
• Number Remaining: 35 (total 36, less current journal)
• Save & Close your memorize General Journal.

How can I recall the memorized transactions?

Since we have memorized the transaction as a Standing Order, monthly when it is due, QuickBooks will prompt you to activate your memorized Standing Order transaction until the Number Remaining is equal to ‘0’. In the event that you wanted to cancel the memorized Standing Order, simply go to List menu and select Memorized Transaction list. You can either delete off the memorized Standing Order transaction or edit the transaction and change it into ‘Don’t Remind Me’.

Every month, you can print a P/L Report from this Fixed Assets Company file, to view the monthly depreciation amount and pass a General Journal in your actual QuickBooks company file. That is, Debit the depreciation expenses and credit the Accumulated Depreciation account.

Beside, you can also print a General Ledger report from this Fixed Assets Company file to have a full schedule on your fixed assets.

QuickBooks is an off the shelf software, if you are willing to think out-of-the-box, it can be a handy tools for you. Join my QuickBooks training class to have a better understanding of how QuickBooks can work for you. 

Disposal of Fixed Assets in QuickBooks

In business, we do dispose of Fixed Assets after it usable life. In QuickBooks, how are we going to record this transaction?

Example 1:

Acquisition cost of a Conference Table (Under Furniture & Fitting) is $3,000.00. The depreciation method used for Furniture & Fitting is a straight line method; with 3 years of usable life.

If this conference table still has 1 year of usable life; That is, the Net Book Value of this conference table is $1,000.00.

How to record this transaction in QuickBooks?

First, we need to create a new Disposal of Fixed Asset account (use Other Income account type, this account will be shown in the Profit & Loss report). Next, we create a General Journal:

    Debit Accumulated Depreciation – Furniture & Fitting account: 2,000.00

    Debit Disposal of Fixed Asset account: 1,000.00

    Credit Acquisition cost – Furniture & Fitting account: 3,000.00

In the Balance Sheet report, both the Acquisition cost and Accumulated Depreciation account of the Furniture & Fitting will be zeroed off. As for the Profit & Loss report, it will show a debit balance (loss) in the Disposal of Fixed Asset account for the amount of $1,000.00.

Example 2:

Now, if you sell this conference table at $1,500.00 (that is, with a gain of $500.00); how are you going to record this transaction?

In the General Journal:

    Debit Accumulated Depreciation – Furniture & Fitting account: 2,000.00

    Debit Cash at Bank: 1,500.00

    Credit Acquisition cost – Furniture & Fitting account: 3,000.00        

    Credit Disposal of Fixed Asset account: 500.00

Note:  Debiting the Cash at Bank account will be the amount of money you get from the sale of Fixed Asset.  In this case, you do had a gain in sale of Fixed Asset. The crediting of Disposal of Fixed Asset account, for the amount of $500.00, is the profit made from the sale of Fixed Asset.

Why the profit from this sale was only $500.00 and not $1,500.00? In this case, we have to consider the fact that this fixed asset still has a year of depreciation (that is, $1,000.00). So, the gain from the sale of fixed asset is $1,500.00 - $1,000.00 = $500.00.