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Level 2

Depreciation Expense Prior to QB?

In 2016 we took the full 179 depreciation deduction on 2 pieces of equipment we purchased for the business.  However, we did not start QB accounting until several months into 2017 and the bank download feed did not go back that far.  Normally, I credit the Fixed Asset Accumulated Depreciation account and debit the Depreciation expense account (thereby reducing income on P&L since it is an actual expense) to account for this.  I don't know how to account for the 2016 depreciation expenses since if I do this it will show a negative bank account balance (the account we used until 2016 was actually closed and zeroed out and the remaining balance was transferred to another account).  Can someone provide insight into how to do this?  THANKS IN ADVANCE!

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Level 15

Depreciation Expense Prior to QB?

"and the bank download feed did not go back that far"

 

Banking has nothing to do with this entry.

 

"Normally, I credit the Fixed Asset Accumulated Depreciation account and debit the Depreciation expense account (thereby reducing income on P&L since it is an actual expense)"

 

It's an Allowance, not an Actual Expense. And All Expense and Income is closed to Equity for prior years. It's always there, seen as Net Income in the current fiscal year and as Retained Earnings, later.

 

You need to Debit the Fixed Asset account for its cost basis, Credit the Depreciation fixed asset account for the depreciation, and that should be all you need; in the case of something not fully written off as expense, you would credit the difference to Equity.

 

"to account for this.  I don't know how to account for the 2016 depreciation expenses since if I do this it will show a negative bank account balance"

 

It's Never part of Banking' depreciation is not Real Expense, not an Actual, and no Money was ever involved. That's why it is called Depreciation Allowance. It's a "not real money but Tax value" entry. Never hit Banking, even with current activity, for Depreciation.

 

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