How to record fixed assets in quickbooks

In this tutorial I will talk about purchasing and recording fixed assets in QuickBooks desktop.

 

 

Anyhow, neither i have added any fixed asset item in the fixed assets item list nor i have created any related accounts in the chart of account so far even though we have a default fixed asset account named “furniture and equipment” which we sure can use, but for this example, I will create new ones at the time of purchasing the asset.

Tutorial Instructions:

 Well to purchase something, either you create a purchase order to pay your vendors or you write a check right away the basic different of creating purchase order and writing a check is that you follow the workflow to pay your vendors when you create purchase orders whereas, when you write a check to pay your vendors, it affects your bank account right away….

Anyhow, in this example, I am going to write a check to purchase a Laptop. So, select “Write checks” under the “Bank” menu. Here , First select your bank account by clicking on the bank account field, then change the date and select a vendor and if you don’t find one, just click on “Add New” and create one or just write the name of your vendor and then click away, it will open a small pop up window and if you have the full info of your vender, just click on “set up” and create your vendor’s profile properly or just click on “Quick add” to create your vendor’s profile with as minimum info as possible.

Then, select the Items tab and click on the “Item” field, it will show you the list of all your items but since we are going to purchase a fixed asset. just click on “Add New” and Select “Fixed Asset” in the “Type” field.

Now, write the name of your asset in the asset name field and if the name of your asset is too long then use abbreviation.  Since I am going to buy a laptop, I am going to write the full name, then write the purchase description and change the date you purchased the asset on and enter the cost of the asset, and add your preferred vendor if you want,

Now here in the asset account field, we can create the related accounts that will appear in the chart of accounts, and to track the asset properly, we need to create three fixed assets accounts.

So, click on the dropdown and select “Add New”, here, make sure that you have selected “Fixed Asset” in the Account type filed and then fill the concerned fields and click on “Save & close”, now our main asset account has been created, and we need to create two more accounts to track it properly, so click on “Add new” and create a cost account and make it a sub account of the asset you want to track, in my case a laptop and then fill the other fields if you want or just click on “Save & Close”.

and here you can see that our main and one sub account has been created and we need to create one more account to record its depreciation, in simple, depreciation is the used-up value of the asset the we allocate to it over its useful life. Well, different methods are used to calculate the depreciation value, like straight line method, declining method, double declining method, etc.  we will talk about the most common ones in the future tutorial,

Anyhow, click on “add new” and create the accumulated depreciation account and make it a sub account of your main fixed asset account which is a laptop in my case….and fill the remaining field if you want and or just click on “save and close”.

Here you can see that the concerned accounts have been created and now we can track it quite conveniently, then, fill the remaining fields if you want or just click on “OK”, here Quickbook just giving me the grammatical errors it’s found, I’m just clicking on ignore all.

Now our fixed asset item and related accounts have been created and it’s also filled the purchased amount which we provided here and if you have paid some significant delivery or other cost, you can add that in the expense tab and write some memo if you want or just click on “save and close”, now we have just recorded a fixed asset into our books. Now lets go to the fixed asset items list to see if a fix asset item has been created or not and here you can see that it’s been created here,

Now let’s go the chart of accounts to see whether the related accounts have been created or not and here you can see that they have been created with the purchased value of the fixed asset which is 3500 in my case and as I mentioned earlier that if you buy something by writing a check, the concerned bank account will affect right away and here you can see that the bank account amount has been reduced accordingly.  

Anyhow, it’s just a matter of preference whether you setup the accounts and items list before recording the purchase or not, in my example I have created them while writing a check. Whatever the way you feel comfortable with just go for that and record the purchase in your books.