Fixed asset & depreciation tracking

You can use any tool, but what you are asking about is FAM = Fixed Asset Manager that is included when you buy QB Accountant Edition. FAM doesn't do anything but act as "smart" index cards; it connects to the data file to place Entries for you, instead of you making them. Only you know if the amount of FA you need to track makes this worthwhile, as well as Changing that QB data file to using the Fixed Asset Item type; that provides the connectivity.

And the FA regulations changed with the TCJA, making all of this much less hassle.

There's a new book out called Simple/Smart Fixed Asset Handling in QuickBooks, for the desktop editions. It shows how to set up Inventory Part Items in a special way to work with fixed assets.

It also has a link to a free spreadsheet for calculating depreciation (not tax depreciation, but methods like SL, 1.5DB, DDB, SOYD) and shows a procedure for getting depreciation transactions prepared by the spreadsheet imported into QuickBooks as a batch. (If you have 50 assets you'll have an imported transaction with 50 lines, because the entire fixed asset list is maintained in QuickBooks, in detail.)

There's no software cost beyond the cost of QuickBooks itself--and the price of the book, of course. I think the book's method is a big improvement over using Fixed Asset Items *if* you don't want to buy Accountant or pay the $300+ cost to add FAM to Pro or Premier.

I would never track this using Inventory Item Type. That ends up controlling Average Cost, for Pro/Premier, or optionally FIFO for Enterprise, and none of that applies to Fixed Assets. Sheesh.

You don't even need Items. I have a Fixed Asset listing by running a Quick Report on the asset accounts and the depreciation accounts, from assets placed on service from Purchase or construction data, and then Memorized transactions for depreciation, one of which is Annually out for 40 years. It isn't that hard to manage. I would never mix that into Inventory functions.

I don't bother using Fixed Asset Items, because I cannot bother with FAM, either. It's not that hard to manage manually. I have some customized reports in a Memorized Report Group, for all of this. It works fine.

Sheesh indeed!

You obviously have not seen the method prescribed by the book. The Items are set up with entirely different account types assigned than would be the case if they were being used for inventories--the COGS field, for instance, is not assigned a COGS account. And a combination of several subitems is used to maintain asset book values, accumulated depreciation, and even automatically calculate gain/loss on fixed asset sales...without cluttering up the chart of accounts with umpteen accounts for individual fixed assets. Please don't "pooh pooh" something you know nothing about!

I've attached a report example copied from the ebook, so you can see that your initial perception is incorrect.

For depreciation to be useful as a management concept (measuring profitability via P&Ls, etc.) it needs to mimic the useful lives of the assets to which it is applied. So not everyone will be satisfied with using Straight Line depreciation for everything, which is the case if you use Memorized transactions to enter depreciation expense.

I completely understand the process of the data flow. Before I started using QB, I used SyMax, the underlying SQL engine upon which the QB Relational database was changed to, in 2006. I have a programming background. I know all of these Tricks and understand all of this.

I didn't PoohPooh the concept; I pointed out the Flaw in the accounting that would be created. You have More Items instead of More accounts, so same difference. But that isn't the concern. It's a Functionality issue, now. That example attachment isn't even using the "Inventory item function" properly. There is no Check to enter for depreciation; it's not a Banking event.

I also would never make it part of Inventory in the accounts.  It should be its own Top Level account and Item; I recommend you Change the FX to Parent Level. You are making a mess out of that Parent Level Inventory item and account reporting.

To reduce the Value in an inventory Item, you would use Adjust inventory, not Check.

You can do this with Accounts:

Vehicles

Sublevel = actual Vehicle

two Subsubaccounts: Basis and Depreciation

You can do all the same details using items or accounts. But using Inventory Item is risky. Using Fixed Asset Items is not useful unless you have FAM. And you don't need Any of this, to manage Assets in QB, which was your first question.

Please see my attachment.

Please see my attachment.

Oh, for this: "So not everyone will be satisfied with using Straight Line depreciation for everything, which is the case if you use Memorized transactions to enter depreciation expense."

I take it you really don't take advantage of these tools, then? You set the Amounts and the cycle. You can set Monthly, half-year, Annually...

"and shows a procedure for getting depreciation transactions prepared by the spreadsheet imported into QuickBooks as a batch"

Why bother? The Amounts can change from year to year, you Memorize them and it's all Automatic. You don't need to be using only SL, to take advantage of Memorized transactions. I can take 5-year or 15-year or whatever applies and different amounts each time, and set up Memorized Transactions for each occurrence, out into the future. "Memorized" in QB desktop does not = the same and recurring. It = All Mapped out and defined. Whatever amount, convention, etc, and how you want them, you Memorize it. It's more powerful than a Spreadsheet to calculate and import, because it's already in QB, waiting to Trigger on each of those dates.

I do the same thing with Invoices. 84 monthly invoices takes me 3 minutes. All memorized and Automated, even though customers fall into 4 groups, and the charges vary between them.

When you try this, please run the Item Valuation reporting. See all the negative Quantity? That's makes a bit of a mess in the P&L, and in the Item Valuation reporting. That is the question I present for Functionality. You will see QB adjust for Negative on Hand = putting valuations to compensate into COGS.

Let us know.

Most of the objections you raise are non-issues. Coming from your stance of preconceptions about how QuickBooks works, there's probably nothing I can tell you that will help you understand what you have not yet been exposed to.

@FTech

Premier has an name limit of 14,500, for some this does not impact them at all, but down the road you never know.
I played with this same thing back in 08, I have not read the book, hell didn't know there was one

in your screen shot you have "house" and a check for depreciation, what type account is house?
since a depreciation entry is paper, not real, where does the 6K come from?

to get the negative value for the depreciation item, I had to use a vendor credit, for that - it worked.  BUT, a/p was wrong on the balance sheet due to the massive vendor credit

Inventory asset on the balance sheet will be correct, but inventory valuation summary will include both the fixed asset item and the depreciation item - big difference in total valuation.  You could of course customize the inventory valuation report to include only inventory items you want, but if you add new ones, then you have re-customize the report.

and then there is the item list, even if you preface the FA parent item with zz-, all those inventory items for fixed assets show up in the middle of the item list, making it longer than hell, and harder to select an different type of item.  Type ahead will probably find the FA item before it finds the discount or other item.

Back then I did not think about creating a second a/p account for the vendor and the depreciation credit, you could do that in desktop, and then customize the balance sheet to not include that second a/p account.  But again if you add or change an account you have to re-customize the report.

more work than it is worth, and too prone to clerical errors IMO

As it stands all my FA are under the parent account, a balance sheet allows me to collapse the sub accounts showing just the sum total as fixed assets.  I would much rather have a long account list that I rarely use as opposed to a long item list I use all the time.

Once a year I bring up a memorized  journal entry, and if necessary  edit any values that need it, and save.  Compound journal entry, depreciation expense, and then all accumulated depreciation accounts.  Quick and easy.

Out of curiosity, are you the author of the book?

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@ljfd wrote:

I have 2018 quickbooks desktop pro.  Is there an add on module or something to record fixed assets and calculate the associated depreciation schedules?  Everything I have come across looks like I would need to buy quickbooks accountant premier version, which is $$$ every year.

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When you go to purchase premier in the US, down at the bottom in pricing is this statement

Want to buy QuickBooks Accountant Desktop without a ProAdvisor membership,
or need to purchase for multiple desktop users? Call [removed]

What you did was buy a subscription, joined the pro advisor program which includes an annual update to QB, a newer version in other words

if you call and order it withOUT the pro advisor membership it is a flat price, and will be supported for 3 years for incremental updates.  After 3 years it still works fine, with the exception of any online connections to banking, payroll, etc.  So at worst, you buy it every 3 years

all my FA are under the parent account, a balance sheet allows me to collapse the sub accounts showing just the sum total as fixed assets.  Once a year I bring up a memorized summary journal entry, and if necessary  edit any values that need it, and save.  Compound journal entry, depreciation expense, and then all accumulated depreciation accounts.  Quick and easy.

My previous CPA and my current CPA both use a separate program for depreciation and enter one annual number from the 4562, I don't lift a finger. I also do not adjust fixed asset value by deducting depreciation from each asset inside of QuickBooks. Our accumulated depreciation account includes it all. But since the CPA has current values for each asset there is no problem when disposing of those assets.

Excel with manual calculations also works.

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@john-pero wrote:

My previous CPA and my current CPA both use a separate program for depreciation and enter one annual number from the 4562, I don't lift a finger. I also do not adjust fixed asset value by deducting depreciation from each asset inside of QuickBooks. Our accumulated depreciation account includes it all. But since the CPA has current values for each asset there is no problem when disposing of those assets.

 

Excel with manual calculations also works.

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A lot of people do it that way, I have a problem with it though, so as food for thought.

if there is a catastrophic event and the cpa's records/computer/data is lost, how long will it take to get the offsite back up (assuming there is one), or if the cpa dies and the estate goes into probate.  Or you part ways, and want your detailed data - we have seen folks, on the other better site, asking what to do when requests for the release of the their data are ignored.

> Premier has an name limit of 14,500, for some this does not impact them at all, but down the road you never know.

Absolutely correct. LIst size is a consideration for any business which has significant number of Items. But many non-retail business types never use more than a couple hundred Items.

> I played with this same thing back in 08...

I did too, years ago, but back then never stumbled upon a setup which would work.

> in your screen shot you have "house" and a check for depreciation...since a depreciation entry is paper, not real, where does the 6K come from?

House is a Customer name used on in-house transactions to keep them out of "real" customer's accounts. Depreciation is entered as a zero-dollar check with a positive total posted to Depreciation Expense and negative amounts to individual assets' Depr Expense subitems. The 6K amount comes from a free depreciation spreadsheet at:  https://bit.ly/2EZFbls. The spreadsheet calculates depreciation for each asset and prepares individual-asset depreciation transactions, which are then imported into QuickBooks as a single transaction.

> to get the negative value for the depreciation item...

...you probably had not considered using a zero-dollar check.

> Inventory asset on the balance sheet will be correct, but inventory valuation summary will include both the fixed asset item and the depreciation item - big difference in total valuation....

Correct. The book warns readers to only use specific reports for getting fixed asset information, and Inventory Valuation is not one of them. Items devoted to fixed assets will of course appear in that report but the information about them there cannot be used.

Anyone who uses the valuation total at the bottom of that report (not sure many people do?...most are interested in specific Items or inventory categories, not the report total) will have to adjust it by subtracting the Fx Item's valuation amount. Fx is the parent Item for all fixed asset Items.

> and then there is the item list...Type ahead will probably find the FA item before it finds the discount or other item.

Inventory Part Items devoted to fixed assets all have Fx as their top-level parent Item, which helps with type ahead (and is also essential for easy fixed asset reporting). If you have an Inventory Part Item (earlier in the Item list) named Fx:Widget, and a Non-inventory Part Item (later in the Item list) named Widget, typing "Wid" will find the Non-inventory Part Item. Type ahead doesn't seem to be a problem.

Type ahead can nearly always be improved by how you structure the entire Item list. When the list is very large, making certain Item categories subitems of a short-named parent Item makes Type ahead more work better/more specifically. I just worked with a business that had dozens of Non-Inventory Part Items for different postage types and weights (First Class<1oz, Media Mail-1 lb., Media Mail-2lb., FlatRateBox-Small, FlatRateBox-Medium, etc.). Making all of these subitems of a parent Item named Po (for Postage) made both Type ahead and selection by mouse easier. They type "Po:" and then can select the desired postage Item from the short list of Items QuickBooks presents.

> ...all those inventory items for fixed assets show up in the middle of the item list, making it longer than hell, and harder to select an different type of item.

Longer, yes. But is that any different from the situation in a business which has 10,000 Items? Many non-retail businesses only use a few hundred Items to begin with...but once you've reached that number you really have to be using Type ahead anyway (along with structuring of the Item list like I mentioned above) to make locating Items easier.

A business with 100 fixed assets would be adding 300 to 400 Items to the Item list...not a significant burden. And businesses with a very large number of fixed assets should probably be using the Accountant edition and Fixed Asset Manager anyway, right? Many, many businesses never have more than a couple hundred fixed assets to manage, and an Inventory Part Item approach is appropriate for them.

> Back then I did not think about creating a second a/p account...

Not applicable. No additional A/P account is needed.

> As it stands all my FA are under the parent account, a balance sheet allows me to collapse the sub accounts showing just the sum total as fixed assets.  I would much rather have a long account list that I rarely use as opposed to a long item list I use all the time.

Understood...personal choice. But Items have other advantages. One is the ability to let a single Item represent a group of like fixed assets--a fleet of vehicles purchased at the same time, for instance. As some vehicles are removed from the group (sold/wrecked/salvaged, etc.) the Item always has an inventory count of the number of vehicles remaining in the group.

> Out of curiosity, are you the author of the book?

Yes. I only mentioned it here because it was specifically appropriate to the original poster's question.

I hear ya. In fact the old CPA refused all attempts to get a digital file that the new CPA could upload into their depreciation software and would only give us a pdf. Cost us extra data entry time and money.

That's where an annual update of the depreciation activity and end of year remaining values for each asset should be included in the client copy of tax returns (something the current CPA does)

@FTech

your right I did not consider a zero dollar check, nice approach.

inventory valuation summary is used a lot by most everyone I run across, keep in mind that users are not well versed in (usually) accounting or QB.  Yes you could do the math to insure that your system total for inventory asset matches the balance sheet, but few will do it.

I use the IRS tables for depreciation, I believe in keeping the books on a tax basis, since I am not publicly listed and subject to the SEC regulations nor do I have the requirements of government contracting.

We'll agree to disagree on how handy using an inventory item would be, I can report on an asset account just as easily, and a fleet of vehicles can be handled the same way.

well since I am a CPA, we don't hire one for our S-corp, but I don't actively prepare other clients books/taxes so I don't purchase the expensive bookkeeping software that would have depreciation calculations.  I just don't understand why calculating depreciation is so "exclusive" and isn't included in basic accounting software such as quickbooks, given that almost every business has fixed assets that need to be depreciation (though I realize depreciation is much less of an issue with the new tax laws).

> I believe in keeping the books on a tax basis, since I am not publicly listed and subject to the SEC regulations nor do I have the requirements of government contracting.

The problem I have with tax-based depreciation is that--especially in recent years (even before the Tax Cuts & Jobs Act)--the tax reg's have been increasingly focused on simply deducting the full cost of fixed assets in the year of purchase, with lots of small businesses deducting the cost of most or all new asset acquisitions in the year of purchase under Sec. 179.

Some people just plug their tax preparer's depreciation figures into QuickBooks as depreciation expense...but that often leads to big distortions both in the P&L and the Balance Sheet, making them close to useless for measuring profitability, looking at income trends, or estimating return on assets or equity.

My personal opinion is that businesses who actually use the P&L and Balance Sheet to monitor their business position and financial progress should maintain their own (non-tax) depreciation schedules, separate from what their tax preparer does for income tax purposes.

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@FTech wrote:

There's a new book out called Simple/Smart Fixed Asset Handling in QuickBooks, for the desktop editions. It shows how to set up Inventory Part Items in a special way to work with fixed assets.

 

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Will this work with QBO?

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It also has a link to a free spreadsheet for calculating depreciation (not tax depreciation, but methods like SL, 1.5DB, DDB, SOYD) and shows a procedure for getting depreciation transactions prepared by the spreadsheet imported into QuickBooks as a batch.

 

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if you use an app like Cdata or Transaction Pro to connect to a spreadsheet?

> Will this work with QBO?

No. QBO prevents assigning fixed asset accounts to Inventory Products & Services, which quashes the whole concept in QBO--one of several places where we can fall victim to QBO's "training wheels", which prevent certain kinds of mistakes but limit flexibility.

> if you use an app like Cdata or Transaction Pro to connect to a spreadsheet?

The book details three methods for importing depreciation expense transactions:  the Batch Enter Transactions window, Transaction Pro Importer, and IIF Transaction Creator--but specifically for the desktop editions. (Many people don't realize that, for years now, the Batch Enter Transactions has been accessible in the Pro and Premier editions...though it is advertised only as a feature of Accountant and Enterprise.)

The spreadsheet could be modified to work with Accounts instead of Products & Services, and thus work with QBO...a project I have considered doing.

This really is Rude to peer users: "Coming from your stance of preconceptions about how QuickBooks works, there's probably nothing I can tell you that will help you understand what you have not yet been exposed to."

If you didn't want some discussion, you should not have posted it here. We learn from each other. We learn by discussing and reviewing what tools to use, what works or does not, and how it works or doesn't.

I have a problem with this comment: "and Inventory Valuation is not one of them."

Now that you revealed you are the Author, it would be helpful to post an image of the 3 account links for a basis item and for a depreciation item that has Negative Quantity, and then show the report details for the accounts linked. In normal use of Inventory items, when negative occurs, you have backwards data flow. You seem to have Sold something, and that is when this occurs. That's why I brought up Functionality. Everything you are doing is a debit and a credit.

And now that we know you are the author, it seems you should be Nicer to peer end users that also have a consulting business. I have, for instance, brought Michelle Long's practice set into a Business College as part of the certification program. You are reaching your audience, so stop insulting us. Thanks.

@@qbteachmt

I posted here to provide general information for the benefit of the original poster, not to sound the depths of all QuickBooks possibilities.

I'd be glad to discuss some of this with you if it were truly a discussion. You provide a wealth of good information in these forums, but in my experience you don't enjoy a polite discussion as much as you enjoy being "right".

Having a discussion with you is like poking a sleeping bear with a sharp stick...you may be right or you may be wrong, but you are likely to be angry in either case, and I don't have time for that. (You might consider being nicer to your peers?)

"I posted here to provide general information for the benefit of the original poster, not to sound the depths of all QuickBooks possibilities."

Without also revealing this is Your book. That's sort of sneaky, don't you think?

Instead, you seem to present this Objectively, then you don't like it when experienced end users have something to say about it. But you need to expect this, in the marketplace. It's like an actor that cannot handle being booed when someone doesn't like their Performance. It's Business, not personal, so stand back and look at the valuable comments your experienced peers are providing.

And you have no idea about me; my style is direct and factual, because that's how I teach, as well. If you want all roses and balloons along with the input, you should hire someone for the feel-good parts. We are business people and use the tools in real life. It's the best audience you can have. Enjoy it, since you came here hiding that fact, that this is your book.

Exactly...

What do you think is the best solution?