For accurate financial records, tracking asset value is important. By recording the fixed asset depreciation in QuickBooks Online, you can manage your business assets efficiently. The value of assets decreases over time due to depreciation and reflecting their real worth. With QuickBooks Online, you can easily track, calculate, and record the fixed assets depreciation. In this blog, we’ll guide you through a complete process to record fixed asset depreciation in QuickBooks Online and help you learn & understand the topic for running your business.
What does Fixed Asset Depreciation refer to?
Your financial record books are kept as accurate and updated with the help of recording the fixed asset depreciation. You can view the values of your assets, like equipment or vehicles, lost over time by depreciation. The values of real assets can possibly be tracked by you with a proper recording of them. To understand your business finances clearly, plan taxes better with QuickBooks Online, which makes this process simple with easy journal entries & keeps your account organized for smooth financial management.
Why is Depreciation Important in QuickBooks Online?
The gradual loss of value of a business’s fixed assets, like equipment or vehicles, is recorded it and a more accurate picture of a company’s financial health is provided by QuickBooks. Instead of being recorded all at once, it ensures that expenses are spread out over time. With the help of income, which is generated by them, they help in matching the cost of assets. Depreciation can reduce taxable income, and it can also affect the tax calculation. In short, the financial reports were kept in compliance with accounting standards, like balance sheets, and were accurate.
Steps to Record Fixed Asset Depreciation in QuickBooks Online
The cost of assets is spread over their useful life with the help of recording fixed asset depreciation in QuickBooks Online. By using a journal entry, you can set up a fixed asset and accumulated depreciation accounts to calculate the depreciation amount and keep a record of them. For better financial reporting, it ensures your books show accurate values of assets and expenses.
Here are a few steps discussed to record fixed asset depreciation in QuickBooks Online, in the following ways:
- Go to the settings.
- Set up Chart of Accounts in QuickBooks Online.
- Then click on the “New” option.
- Develop a Fixed Asset account for your asset.
- Again, click on the create option to construct an Accumulated Depreciation account.
- Press the icon to calculate the depreciation monthly or yearly.
- To create a QuickBooks Journal Entry, go to the settings and click on the “ + New” icon.
- Choose an appropriate period-end date with debit and credit.
- Debit: Depreciation Expense account
- Credit: Accumulated Depreciation account
- Press the Save option and make it permanent, and close it.
Common Issues to Avoid
While you record fixed asset depreciation in QuickBooks Online, your reports become inaccurate due to some small mistakes. To keep your books clean and correct, just avoid these errors and common mistakes by following the steps below:
- Don’t create separate accounts for each fixed asset.
- Not remembering the accumulated depreciation accounts.
- Keep the record of depreciation directly as an expense instead of a Journal Entry.
- Using incorrect dates.
- Not keeping up-to-date with the depreciation monthly or yearly.
- When the disposal or sales of assets are no longer needed, ignore them.
Benefits of Fixed Asset Depreciation in QBO
The fixed asset offers tangible benefits which significantly impact on business’s financial health, beyond its importance; depreciation is more than just an accounting practice. Here, we’ll discuss the benefits of fixed asset depreciation with a brief explanation, as mentioned below:
Exact Expense Reporting
While comparing to the revenue generated, depreciation properly ensures that companies have recorded expenses that are accepted from using an asset. Without fixed asset depreciation, misleading financial information leads businesses towards risk, overstating or understating the total asset expenses.
Correct the Value of Net Book
Due to wear and tear, the actual value declines over time, for which businesses often report the original cost of the purchase order in QBO asset. By subtracting accumulated depreciation, companies are helped from depreciation to calculate the net book value of an asset from the purchase price.
Cost Recovery
Instead of deducting the full amount of a single expense, depreciation allows businesses to allocate its useful life with the cost of an asset over. This helps businesses to make financial planning, recover the cost of assets gradually, and manage the replacement of future assets.
Conclusion
In conclusion, we have discussed everything in the above with a brief explanation of what you need to know and understand about “Record Fixed Asset Depreciation in QuickBooks Online”, which will help you to maintain your business with a safe and secure feeling with accounting software that works smoothly. If you have any doubts on this topic, you can talk with our tech support to receive assistance from QuickBooks with expert service.