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How do you record the downpayment for an asset when the down payment is in one year and the asset is purchased the following year?

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RainflurryAnswer

Level 11

@Towmanofba

I would suggest creating an Other Current Asset account called "Deposit on Asset" and assigning that to the payment issued for the deposit in Year 1. When you purchase the asset and pay the balance due in Year 2, enter the payment/bill as the total amount for the asset and the Deposit on Asset account as a negative amount.

That is because you don't want your balance sheet to show any cost for the asset at year-end. If you have a balance for the asset at year-end, your tax preparer may assume you bought that asset and start depreciating it, which you don't want.

BigRedConsulting

Level 15

I don't think the dates matter.

- Record the down payment using the asset account you are using to track the asset.

- Similarly, record the purchase, when you pay the remaining amount, using the same asset account.

RainflurryAnswer

Level 11

@Towmanofba

I would suggest creating an Other Current Asset account called "Deposit on Asset" and assigning that to the payment issued for the deposit in Year 1. When you purchase the asset and pay the balance due in Year 2, enter the payment/bill as the total amount for the asset and the Deposit on Asset account as a negative amount.

That is because you don't want your balance sheet to show any cost for the asset at year-end. If you have a balance for the asset at year-end, your tax preparer may assume you bought that asset and start depreciating it, which you don't want.

T

TowmanofbaAuthor

Thank you for the help.

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