Category Archives: Fixed Asset

Fixed Assets

Fixed assets, which is a non-current asset, is a balance sheet account. The Plant and Machinery, Furniture and Fittings, Office Equipment, etc. are fixed assets.

It is common for small business accounting software not includes a fixed assets module; a module which allows the user to tracks and calculates depreciation of an individual asset automatically.

You can use a spreadsheet as a fixed assets register if the requirement is simple. Do consider a fixed asset management software if you have outgrown a ‘spreadsheet’ asset register or get a custom solution which tailors to your need. Tracking and reconciling assets can be a complicated process, especially when you have hundreds or thousand of them (and in multiple locations).

The asset, which you have purchased, need to update in both accounting software and the fixed assets register. It debits the fixed asset account and credits accounts payable or a bank account (depending on the transaction type or accounting method) when recording the transaction in an accounting system.

The spreadsheet (asset register) capture information such as the assets ID, date acquired, description, cost, depreciation, accumulated depreciation, and net book value. Optionally, you may include the serial number, supplier, supplier’s invoice date and reference number, warranty expiry date, asset location, who uses it, etc. (Do consult your accountant if you do not know how to create an asset register with a spreadsheet for your region).

Fixed Assets

Based on the fixed assets register, record the monthly or yearly depreciation via a general journal; it debits depreciation expense and credit accumulated depreciation account.

It may be good to have the asset register separated from the accounting system. When you changed accounting systems as your business grow or change of business model, it does not affect the asset register.

 

 

 

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.

Inventory to 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:

Please visit the IRAS website if the above links have moved.

 

The Credit Card

Software: MoneyWorks accounting software

You bought a Computer, $1,800.00 before GST, for the company from a retail store with your credit card. How are you going to record this amount owing to you and the fixed asset in your MoneyWorks accounting software?

The Credit Card account.

You need to add a new Bank account type of account, the description of the account can be “Amount Owing to You”. Then, at the Bank Settings tab of the bank account, select “Credit Card” from the “Bank Account is” drop down list.

credit card

The Purchase Invoice.

Next, use the Purchase Invoice transaction to record the purchase of the Computer.

You need to select the Fixed Asset account in the “By Account” tab; in our example, we use Office Equipment account.

purchase invoice

The double entry for this transaction will be:

Debit Office Equipment account: $1,800.00
Debit GST Paid account (7% GST): $126.00

Credit Accounts Payable: $1,926.00

If you prefer to pay directly instead of recording the supplier bill and follow by payment of the bill, you can skip this Purchase Invoice step and record the purchase using the Payment transaction. In the Payment transaction, you will use the fixed asset account as the above in the “By Account” tab.

In the Balance Sheet report, both the Accounts Payable account and the Fixed Asset account will be updated.

Pay Supplier Bill.

Use the Payment transaction to make payment for your supplier’s bill for the computer purchased. In the payment transaction, select the “Amount Owing to You” account from the drop down list of the Bank field.

pay bill

The double entry for this Payment transaction will be:

Debit Accounts Payable: $1,926.00

Credit “Amount Owing to You” account: $1,926.00

With this payment, the Balance Sheet report, the “Amount Owing to You” account will be updated and presented in the Current Liability section.

Balance Sheet owing you

Pay “You”.

To make payment to yourself, you use a Payment transaction. The Bank account use in the Payment transaction will be your actual bank account that pays you and select the “Amount Owing to You” account in the Account tab.

pay you

The double entry for this transaction will be:

Debit “Amount Owing to You” account: $1,926.00

Credit “Cash at Bank” account: $1,926.00

Balance Sheet final