entering large purchase expense in quickbooks

Discussion in 'Business Operations' started by profitmargin, Jan 1, 2002.

  1. profitmargin

    profitmargin LawnSite Member
    from Midwest
    Messages: 3

    I use QuickBooks and an accountant for my accounting. I only visit the accountant once a year. It has worked good so far. The one thing I have not figured is large purchases, such as equiptment. Currently I am writting off the entire amount as an expense. This throws off my P&L as it shows the entire purchase amount during that month.

    I know I am to depreciate equiptment over a period of time. The question is what do I list the purchase as and how do I determine a depreciation for each piece of equipt.

    How do you do yours? Please help.
  2. SLSNursery

    SLSNursery LawnSite Senior Member
    Messages: 442

    You can find the exact info in the Quickbooks help section, but large equipment which will be depreciated is considered a fixed asset.

    Create 3 fixed asset accounts -

    1 main account named after the item.
    1 sub account called Cost of the item
    1 sub account called accumulated depreciation.

    If you pay with a check, debit your checkbook and credit the Cost of the item account. This makes the fixed asset worth what you just paid for it. Then, you enter the depreciation according to your accountant into the accumulated depreciation sub account. When this is done properly, the main account show the current value of the item to your company after depreciation.

    Any expenses associated with this item, not capital improvements, get written off in a different expense account. If you do make immediate improvements, such as adding a dump body or plow to a cab and chassis, check with your accountant, but I would add the cost of the improvement to the cost of the item, then depreciating the whole thing.

    Hope this helps.
  3. bruces

    bruces LawnSite Senior Member
    Messages: 648

    Phil is exactly right, with one minor correction.

    The cost of the item is a debit, the entrty to the checkbook is a credit. Don't worry, when you enter the check and assign the accounts, Quickbooks handles this for you when entering the check.

    As far as depreciation, if you give your accountant the cost he should be able to give you a monthly figure to enter for depreciation.
  4. SLSNursery

    SLSNursery LawnSite Senior Member
    Messages: 442

    So, its been a while since I had thought about debit and credit. I'll get it right next time.

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