How to convert an inventory part to a demo equipment in the QuickBooks accounting software?
Software: Intuit QuickBooks #accounting software
Some retailer or wholesaler may convert the existing inventory into a demo equipment for the showroom or as a loan set for testing.
Your accountant may classify a demo equipment as a fixed asset aka non-current asset if the expenditure qualifies (Please check with your accountant if you have doubt on asset classification). Then, you need to transfer the item from the inventory asset to the fixed asset account.
You can create an inventory part from the Item List whereas the fixed asset item is from the Fixed Asset list under the Lists menu.
An Inventory Adjustment is used to adjust the inventory part but not the fixed asset. You may consider using a Bill or a Write Cheque for transferring between the inventory asset and the fixed asset.
You select the demo equipment from the Item tab and enter the cost of the equipment. On the following detail line of the Item tab, you pick up the inventory part and enter a negative quantity and value for the item. The journal behind the transaction will debit the fixed asset and credit the inventory asset account. The transaction amount is zero as both the inventory asset and fixed asset account have contra with each other.
You record a sales invoice with the demo equipment when the used equipment has sold. The journal of the sales invoice is debiting the accounts receivable (or the bank account) and credit the fixed asset account. A General Journal is needed to adjust the fixed asset account when the sales value of the demo equipment is different from the asset cost (Please check with your accountant on disposal of fixed asset).
Resources:
- The “Capital Allowances and Who Can Claim” from IRAS.
- IRAS e-Tax Guide — “Machinery and plant : Section 19/19A of the Income Tax Act“
Please visit the IRAS website if the above links have moved.