Fixed assets in QuickBooks can also be referred to as long-term assets or non-current assets. Managing your business system involves more than tracking incomes and costs. If you have purchased at any time a computer, a vehicle, office furniture, or a machine for your business, you have created an investment in a fixed asset. And if you utilize QuickBooks to handle your finances, you are lucky because QuickBooks can assist you track, manage, and stay on top of your fixed assets.
What is a Fixed Assets in QuickBooks?
A fixed asset item purchased by your business for long time use. Generally further than a year, it is not an item that you make a plan for selling to the customer, but something to help you quicken your business. Fixed assets include these assets such as laptops and computers, buildings, vehicles, office furniture, tools and equipment, land. Fixed assets are referred to as long-term assets. They are different from costs such as electricity bills or office supplies, which are finished quickly. Fixed assets in QuickBooks are provide the value over time.
Why Are Fixed Assets in QuickBooks Important?
You may be wondering why it is so important to track fixed assets properly in QuickBooks.
- Accurate Financial Reporting: Fixed assets are a part of your business’s value. Keeping them tracked properly helps you understand your company’s financial health.
- Tax Benefits: Most fixed assets lose value over time. If you are recording depreciation properly in QuickBooks, you can increase your expenditure. This means reduced taxes.
- Better Planning: Knowing what assets you own and how old life of those assets so that you can plan for repairs, upgrades, and future buys.
- Staying Organized: If you ever need to submit insurance claims, sell an asset, or report to investors, everything will already be perfectly arranged.
Can You Use QuickBooks Online for Fixed Assets?
Yes! QuickBooks Online and QuickBooks Desktop both allow you to track fixed assets in the same way using the same process. QuickBooks is becoming user-friendly, and many small businesses prefer it for cloud access and a more user friendly interface. The key difference is that QuickBooks Desktop features a Fixed Asset Manager, which can help you automate depreciation. QuickBooks Online does not have that feature, so you will need to do it manually or work with an accountant.
Steps to Set Up Fixed Asset Manager In QuickBooks
QuickBooks does not have a built-in fixed asset module, but that is okay. You can still manage the chart of accounts through the fixed assets, Journal Entries, and Reports features.
Here is a step-by-step guide to achieve it.
Step 1: Create the Fixed Asset Account in QuickBooks
The initial requirement you will require a location to track your asset. This is completed in your chart of accounts.
- Go to the Settings in the gear icon.
- Select the Chart of Accounts.
- Click the New button.
- Select the fixed Asset for the Account type.
- For the Detail type, select the most related option e.g. Computers, Vehicles etc.
- Name of the account, for example, Office Computers or Company Vehicle.
- Click the Save and Close button.
Now you have a dedicated place to track the QuickBooks assist.
Step 2: Record the Purchase to the Fixed Asset
Next, the record purchase for the fixed asset. You will do this like other payments,but you will connect to the fixed asset account.
If you purchased the asset using cash or through your bank account:
- Go to the New and choose costs or check.
- Used to make the payment select the account e.g., Bank Account.
- For the Category, Choose the fixed asset account you created recently.
- Enter the amount you paid and with a brief description e.g., Dell Laptop for Office.
- Save to the transaction.
If you financed the purchase such as a loan or credit, you may require to include a liability account. This can become somewhat complicated, if you are not sure, it is a good idea to ask your Accountant.
Step 3: Track Depreciation
Depreciation is also referred to as a decrease in asset value over time. For example, a $1,000 computer could be valued at $600 after one year. QuickBooks Online does not automatically calculate depreciation for you. However, you can create journal entries manually. Then create a Fixed Asset account called Accumulated Depreciation.
Create the New Two Accounts
- Go to the New Chart of Accounts.
- Depreciation Expense is to create an expense account.
- A fixed asset account refers to creating Accumulated Depreciation.
Record Depreciation Every Month or Year
- Select the New Journal Entry.
- Debit the Depreciation expense account.
- Credit the Accumulated Depreciation account.
- Enter the amount based on how you calculate depreciation, your accountant can use this.
Step 4: Keep the Fixed Asset List
While QuickBooks helps you to track your fixed assets, it is best to keep a separate list of all your assets in a spreadsheet such as Excel or Google Sheets.
- Asset name
- Purchase date
- Purchase price
- Serial or model number
- Warranty details
- Useful life
- Depreciation method
- Current value
- Maintenance records
This list is useful for taxes, insurances, audits, and when considering assets for upgrades or sales.
Step 5: Selling or Disposing of a Fixed Asset
At a certain time, you could dispose of or sell an asset. In such cases, you must take it off your records.
Steps to Follow:
- Go to the New Journal Entry.
- The fixed assets account removes the asset value.
- Removeing the corresponding Accumulated Depreciation.
- The record for any cash received from the sale.
- If there is any profit or loss on the sale, the asset sale account records it under loss or gain.
This section can become a little complicated, especially when calculating gains or losses,so it is checked to the professional is a smart decision.
Things to Do When You Sell or Retire an Asset
- Record the sale: Utilize a Journal entry or a sale receipt, depending on the received payments.
- Remove accumulated depreciation: Modify your depreciation accounts.
- Remove the asset: The start-up cost asset by reducing the fixed asset
This can be a bit detailed, so it’s always a good idea to check with your accountant when retiring or selling an asset.
Conclusion
Fixed assets in QuickBooks may sound like a big, complex accounting topic but with QuickBooks, it is easily manageable. Provided you follow the steps to set up accounts, document purchases, and monitor depreciation, you will be in excellent condition.
Organizing your fixed assets in QuickBooks not only helps with taxes and reporting. It also assists your quick, more efficient, and informed business. If anything feels too complicated, an accountant can assist fill in the gaps.
With QuickBooks and some understanding, you have all the tools necessary to manage your business assets effectively.
