cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Not applicable

Best Chart of Accounts Structure for Tracking Fixed Assets and Depreciation?

Hi all, 

Just curious if anyone has any best practices within Quickbooks Online for tracking their fixed assets and depreciation. 

In the desktop version of the product, I would typically have in my chart of accounts one parent account for an asset type and sub-accounts for each specific asset. 

Example: 

Machinery and Equipment
-- Equipment #1 - Cost
-- Equipment #2 - Cost
etc. 

I would then have one parent account for depreciation of that asset type and sub-accounts for each specific asset. 

Example: 

Accumulated Depreciation of Machinery and Equipment
-- Accumulated Deprecation of Equipment #1
-- Accumulated Deprecation of Equipment #2
etc. 

The benefit of this for me is that the total cost of the assets and the total amount of accumulated depreciation automatically sum in reports, so it is very easy to prepare the financial statements from this data. 

Now, in Quickbooks Online (I'm a new user) I see there is checkbox when creating an asset account to track deprecation. This automatically creates a cost and depreciation sub-account, both nested under the asset account. 

This looks nice visually but lacks the benefit of automatically totalling up all cost and all deprecation for that asset class. 

I'm wondering, what are the benefits of using Quickbooks' built in accounts for cost and depreciation vs. creating them manually? Do these accounts serve any purpose beyond the convenience of having them created for you and the visual appeal?

Will I be missing any other functionality if I create my own depreciation accounts using the main depreciation account as the parent instead? 

Would love to hear how others are tracking assets and deprecation as well. 

Thanks!

Solved
Best answer 10-15-2018

Accepted Solutions
Established Community Backer ***

You can do it either way, you do not lose any functionali...

You can do it either way, you do not lose any functionality, but what you lose is the ability to easily see the book value of the fixed asset, the parent account which should not be posted to, will sum the cost and depreciation (algebraic sum) and show the current book value

if you do it with one parent account for all depreciation you have to look up the fixed asset cost, scroll and subtract the depreciation amount for that asset mentally or on a calculator to find book value.

17 Comments
Established Community Backer ***

You can do it either way, you do not lose any functionali...

You can do it either way, you do not lose any functionality, but what you lose is the ability to easily see the book value of the fixed asset, the parent account which should not be posted to, will sum the cost and depreciation (algebraic sum) and show the current book value

if you do it with one parent account for all depreciation you have to look up the fixed asset cost, scroll and subtract the depreciation amount for that asset mentally or on a calculator to find book value.

Not applicable

Thanks Rustler! That's helpful. So it sounds like it's ju...

Thanks Rustler! That's helpful. So it sounds like it's just a matter of preference in terms of what values you'd easily like to see in the chart of accounts.

I do like the appearance of having both cost/depreciation under the single account. But then I have to sum up a dozen accounts to get the single line item for my financials which is also a pain ;) I guess I'll have to think about it.

Thanks again!
Established Community Backer ***

why would you have to sum the depreciation accounts? if...

why would you have to sum the depreciation accounts?

if you want to see the total depreciation per period, open the P&L and look at depreciation expense, that is the other side of the depreciation entry - all depreciation amounts use the same expense account for posting

debit depreciation expense
credit accumulated depreciation - asset name
Not applicable

True, however, when I'm preparing tax return for this org...

True, however, when I'm preparing tax return for this org using the standard GIFI form for financial info, they also have on the balance sheet one item for each asset class, e.g.,

ASSETS

Machinery and Equipment
Acum. Depreciation of Machinery and Equipment

So I find myself needing to sum up all those amounts on the asset side. Not a big deal either way obviously :)
Established Community Backer ***

oops sorry I missed that this was Canadian and I know not...

oops sorry I missed that this was Canadian and I know nothing about Canadian tax reporting requirements
Not applicable

No problem -- thanks a lot for your help!

No problem -- thanks a lot for your help!
Not applicable

I realize this is an older question, but I just wanted to...

I realize this is an older question, but I just wanted to add that you could still track each individual asset. In the Chart of Accounts (where >> is sub account) create a parent account and sub accounts for each asset you want to keep track of accumulated depreciation and the current "book" value as follows:

Equipment 1 (parent acct.)
>>Equipment 1 cost (sub acct.)
>>Accumulated Depreciation Equipment 1

A) Enter the purchase amt (value) in the "Equipment 1 cost (sub acct,)" and then
B) each month (or year, whichever your company does) enter the amt of depreciation in the "Accumulated Depreciation Equipment 1(sub acct.)"  
The parent account "Equipment 1" will automatically total the current value of the Asset (Cost -less- Accum. Depre.).
 
You can do this for all your assets, and the current value can be seen in the parent acct, while the accum. depre. amt can be just as easily found in each sub acct. If you would also like to know the Total Amt. of all Depreciation (for all assets combined) you could create a parent Accum. Depre. Acct. to collect that info for you as well. However, most financial reports want you to list each asset and its depreciation amt individually.
Hope this can help someone in the future.
Established Community Backer ***

Old question I see, that popped up after a similar one I...

Old question I see, that popped up after a similar one I just responded to so had to read and must reply.  I definitely agree with accounting for accumulated depreciation by individual asset to see the NBV easily,
but must disagree with the other side of the entries, ie, posting all depreciation expense to one account. This may work for some small companies but not for all, particularly those in my industry and others too. Depreciation, like any other expense, must be properly recorded depending on what a cost represents, so for example in QB it may need to be split by Class if classes are used to define groups of expenses for different divisions or locations. Divisions might be business areas, for example if you have IT biz with alot of computer equipment used for just that division might need to segregate. Indirect cost pools as used in my industry of GovCon are another similar possible reason for needing to split depreciation expense. This is not something you can define in general for all companies but just know that there is no reason to be limited to only one depreciation expense account if/when makes sense see more detailed amounts.
Frequent Explorer **

Re: Old question I see, that popped up after a similar one I...

How would you feel about x1 Depreciation Expense Parent account and use Sub Accounts for the various assets / categories / classes?

 

Cheers,

 

 - Alan

Established Community Backer ***

Re: Old question I see, that popped up after a similar one I...

Summary vs. detail accounts in QB are personal preference for how you want to see on reports.

I look at Trial Balance report for almost everything since I want to see all accounts on one page. Summary accounts just make the report longer and redundant from my view, but if you provide reports to others outside of accounting, they might prefer to see the summary level reports. 

 

How and where you FA detail and compute depreciation is what I would consider for how to decide.  If your CPA computes for you annually for books and taxes or if you do manually and what level of detail is on those reports since no need for redundant detail if one is reliable. 

Hassle to avoid is when you sell or dispose of asset, want to easily see NBV to write off books.

 

Generally FA system shows line for each asset, so on books, I would just show asset categories, but I do like to see if by category most is depreciated or not and use that for budgeting and to estimate depreciation (by cost pools in my industry), but similar to Classes in QB for the split.  Again, this is just my personal preference, since you tend to have preferences after 3 decades!

 

However, I must mention that most of my clients have almost no fixed assets since we use GAAP minimum of $5000 for most or IRS Safe Harbor minimum of $2500 for my smaller clients and me, but of course when I was W-2 employee for much larger companies saw way more FA.

 

What I see on small biz is some CPA's capitalizing items as low as $100, which is so crazy to me.

Not applicable

Fixed Asset List and Chart of Accounts

QuickBooks Desktop Pro 2018

If you enter all fixed assets in the Chart of Accounts using the parent account and two fixed asset type accounts as sub accounts, what of the Fixed Asset Item List?

Is there any point in filling in the Fixed Asset Item List if you list the assets in the Chart of Accounts?

Are there problems if you duplicate and enter assets in both places?

Any help appreciated. 

 

QuickBooks Team

Re: Fixed Asset List and Chart of Accounts

Hello there, Bobby Chiggins.

 

Let me bring clarifications to your concern about entering fixed assets in QuickBooks Desktop.

 

When you enter two fixed asset type accounts as sub accounts using one parent account, you'll need to create a separate Fixed Asset Item for each of these sub accounts in QuickBooks.

 

Also, filling in the Fixed Asset Item List is highly recommended for it contains a detailed information that you may need for future tracking purposes.

 

Lastly, there shouldn't be any problem if you enter these assets in both Chart of Accounts and Fixed Asset Item List as long as you choose the correct Asset Account used in both places.

 

If there's anything else I can further help, please let me know. It's always my pleasure to assist.

Established Community Backer ***

Re: Fixed Asset List and Chart of Accounts

So there is no way to only input one time, like to the FA listing and have that flow into GL based on assigning GL account number to FA when input?  Dual data entry sucks for sure.

Not applicable

Re: Best Chart of Accounts Structure for Tracking Fixed Assets and Depreciation?

Hi there,

I use this same method and was wondering how you add maintenance and repair costs using this system. I need to track what is being spent on equipment. Any advice would be helpful.

QuickBooks Team

Re: Best Chart of Accounts Structure for Tracking Fixed Assets and Depreciation?

Hi sunsetranch,

 

You can create an expense account and use it when recording your maintenance and repair cost. Let me walk you through how.

  1. Press CTRL+A.
  2. Click the Account drop-down.
  3. Click New. Then, click the Expense radio-button.
  4. Click Continue.
  5. Follow the steps that will guide you through the rest.
  6. Click Save & Close.

Once done, use that account when creating an expense transaction.

 

You can read this article for your reference: Expenses and vendors.

 

Let us know if you need help with anything else. The Community is here to help.

Not applicable

Can you give me these steps for Quickbooks Desktop 2019 Mac version?


@ShiellaGraceA wrote:

Hi sunsetranch,

 

You can create an expense account and use it when recording your maintenance and repair cost. Let me walk you through how.

  1. Press CTRL+A.
  2. Click the Account drop-down.
  3. Click New. Then, click the Expense radio-button.
  4. Click Continue.
  5. Follow the steps that will guide you through the rest.
  6. Click Save & Close.

Once done, use that account when creating an expense transaction.

 

You can read this article for your reference: Expenses and vendors.

 

Let us know if you need help with anything else. The Community is here to help.


 

QuickBooks Team

Re: Can you give me these steps for Quickbooks Desktop 2019 Mac version?

It's great to hear again from you, @sunsetranch.

 

Yes, I can guide you in creating an expense account. Let's get started!

  1. Go to the Lists menu.
  2. Choose Chart of Accounts.
  3. Click the Plus Icon (+).
  4. Select Expense account.
  5. Enter the account details.
  6. Click Ok.

 

a4.gif

To learn more about managing your chart of accounts, you may refer to this article: Your Chart of Accounts (Go to page 45.)

 

Let me know if you have other questions. I'm always here to help.

Need to get in touch?

Contact us