Tag Archives: QuickBooks Fixed Assets

Equipment Rental

Software: QuickBooks accounting software

In Equipment Rental business, the equipment that you purchased are your assets, which you need to track the depreciation of it useful year. Besides, you need to keep track of the ins and outs of the equipment so to have a good feel of the stock availability.

If you are using QuickBooks, how are you going to track the cost and depreciation of the asset to fulfill the accounting requirement and at the same time tracking of the stock movement of your equipment?

Assuming you purchase an equipment at the cost of $9,000.00 and depreciate it over three years at $3,000.00 per year; and you are going to rent it out at $300.00 per day.

Before you recorded the transactions, first you create a set of fixed asset account for your equipment, assuming we name it as “Equipment ONE”, so, the accounts will be:

Equipment ONE

Cost – Equipment ONE

Accumulated Depreciation – Equipment ONE

I preferred to create the fixed asset accounts as above so I am able to view the cost, accumulated depreciation and net book value of the individual asset in my balance sheet report. Some user may preferred to create it as:

Equipment assets

Equipment ONE

Equipment TWO

.

.

etc

In this method, both the cost and accumulated depreciation will be sharing the same account (Equipment ONE). When printing of Balance Sheet, report, you can simply use the collapse function to show just the Equipment assets account instead of breaking down into individual assets.

Next, in the item list, you need to create a stock item for “Equipment ONE”. This is to track the movement of Equipment ONE; the income account used for Equipment ONE will be Disposal of Fixed Asset (an Other Income type of account). So, in the event when Equipment ONE is sold, the sales value will be automatically posted to the Disposal of Fixed Asset account.

Besides, you are require to create a Service item, such as “Rent – Equipment ONE”, this is to be used in the Sales Invoice (you use this item to charge your customer), and the account associated with this Service item (Rent – Equipment ONE) will be the Sales Income account.

Enter Bill

When entering bill from the supplier of Equipment ONE, in the expenses tab, we use the fixed assets account, Cost – Equipment ONE, with the purchase value of 9,000.00. Next, at the items tab of this bill, we use Equipment ONE stock item with a quantity of 1 but leave the cost as 0.00.

In this way, the double entry for this bill will be:

Debiting Cost – Equipment ONE account (Fixed Asset account): 9,000.00

Crediting Accounts Payable account: 9,000.00

Debiting Inventory Assets account: 0.00

Note: Inventory Assets account is involved in this transaction is due to Equipment ONE stock item was used. Since we didn’t input any amount in the cost field of this stock item, the amount debited to Inventory Assets account is 0.00.

If you were to view your stock status by item report, you will see that you have 1 quantity of Equipment ONE in the stock on hand column.

Invoices – renting of equipment

Assuming you rent out Equipment ONE for three days, you need to create two invoices. First invoice will be using the “Rent – Equipment ONE” service item, with the quantity of 3 (three days) and the amount of 900.00 (300.00 x 3 days). This invoice will be given to the customer during rental service for them to make payment to you. The double entry for this sales invoice will be:

Debiting Accounts Receivable account: 900.00

Crediting Sales Income account: 900.00

The second invoice is for internal use, at the detail line, you use Equipment ONE stock item with quantity of 1 and amount of 0.00. This invoice is to track the out going of the equipment and the stock on hand will be 0 after invoice is recorded. Since there isn’t ant value in this transaction, no values will be posted to the relevant accounts.

Credit Note – equipment returned

In the event when equipment returned, you need to create a Credit Note (Adjustment Note) to credit back the Equipment ONE with the amount of 0.00. This quantity will be added back to your stock on hand. Like the second invoice that you have created earlier, this is for internal use only.

Depreciation

Monthly or yearly depreciation for Equipment ONE will be recorded via a General Journal Entry. The double entry will be:

Debiting Depreciation Expense (Expense account)

Crediting Accumulated Depreciation – Equipment ONE account (Fixed Asset account)

Deposal of Fixed Asset

In the event when you sell off your equipment, you need to pass a journal to revert your fixed asset and follow by an invoice to bill your customer.

The double entry for your disposal of fixed asset will be:

Debiting Accumulated Depreciation – Equipment ONE

Crediting Cost – Equipment ONE

Debiting Disposal of Fixed Asset (Other Income account type)

Equipment ONE stock item will be used in the detail line of the invoice for sale of fixed Asset with a quantity of 1 and a sale amount. The double entry for this sales invoice will be:

Debiting Accounts Receivable

Crediting Disposal of Fixed Asset account (Other Income type of account)

In the Balance Sheet, the Equipment ONE fixed asset account will be zero off and the Profit and Loss report will show the net income/loss for the sale of Equipment ONE under the Disposal of Fixed Asset account.

Purchase of Fixed Asset with Loan

Software: QuickBooks accounting software

Usually, I preferred creating three accounts for each type of Fixed Asset. One will be the main account and two sub-accounts underneath for cost of Fixed Asset account and accumulated depreciation account.

Example:

Motor Vehicle (main account)

Cost – Motor Vehicle (Sub-account)

Dep Acc – Motor Vehicle (Sub-account)

When purchased a Motor Vehicle, Cost at S$100,000.00 with 5 years straight-line depreciation, from ABC Motor Company. The supplier of my Bill will be “ABC Motor Company” and Account used in the bill will be the Cost – Motor Vehicle account. The double entry for this transaction will be debiting Cost – Motor Vehicle account (Balance Sheet) and crediting Accounts Payable (Balance sheet) for $100,000.00.

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How can I manage Fixed Assets in QuickBooks?

In QuickBooks Asia version, it does provide a Fixed Assets Item list for user to keep track of the Fixed Assets purchased. Personally, I do not like to use this Fixed Assets list provided by QuickBooks. I found that there is something crucial missing out from the Fixed Assets Profile – Depreciation information.

Most of the small businesses who cannot afford to have Fixed Assets tracking software will use a spreadsheet to record the Fixed Assets purchased with the depreciation schedule of the assets. Then, base on the depreciation value, they will record it in QuickBooks via a General Journal.

I do not like to use spreadsheet to track my Fixed Assets; partly, I am not good in spreadsheet’s formula.  I prefer to use QuickBooks to do all my accounting schedule rather than using a separate program.

How I use my QuickBooks to track the Fixed Assets?

I created two QuickBooks company files. I created one for my actual accounting and the other for my fixed assets tracking.

2010_0119_01 In the Fixed Assets company file, Chart of Account list, I will first create the main categories such as Computers, Furniture & Fittings, Office Equipment, Motor Vehicle, Machinery and Property. Then, I will enter the entire Fixed Assets name such as IBM ThinkPad T60 – 12345678, IBM ThinkPad T61 – 12345678 and Compaq nx9010, etc under the sub item of the main category.

2010_0119_05 Next, I will pass a General Journal to record the value of the asset cost. Example: I bought an IBM ThinkPad T60 (serial number: 12345678), on 1 Jan 2010, at $2,268. I will debit IBM ThinkPad T60 – 12345678 account for $2,268 and crediting Assets Purchase account (Cost of Goods Sold Account) for $2,268. Since this is not the actual set of financial account, so it does not matter if I were to use Cost of Goods Sold account for this transaction, I just need an account for my double entry.

You may consider adding the extra information such as location of the asset, who uses it and warranty information in the Description field of the account profile. This information will printed when you printed out the Account List report.

Then, create the Depreciation Expense account for Computer, Furniture & Fittings, etc in your Chart of Account list. This is to capture the depreciation of the individual asset.

How can I record monthly depreciation schedule of the asset?

From General Journal, credit IBM ThinkPad T60 – 12345678 (Fixed Assets type of account) for $63 ($2268 / 36 months) and debit Depreciation – Computers expense account for $63. In the General Journal Form, right-click and select Memorize General Journal.

2010_0119_02 In the Memorize General Journal wizard:

  • Name: Com-IBM ThinkPad T60-12345678 (Note: you may have to shorten the name to fix into the name field. I added a ‘Com’ in front of the Memorized General Journal is to differentiate between Computers and other fixed assets such as Furniture & Fittings (FF)).
  • Select ‘Standing Order’ radio button.
  • How Often: Monthly
  • Next Date: 28 Feb 2010
  • Number Remaining: 35 (total 36, less current journal)
  • Save & Close your memorize General Journal.

How can I recall the memorized transactions?

2010_0119_03 Since we have memorized the transaction as a Standing Order, monthly when it is due, QuickBooks will prompt you to activate your memorized Standing Order transaction until the Number Remaining is equal to ‘0’. In the event that you wanted to cancel the memorized Standing Order, simply go to List menu and select Memorized Transaction list. You can either delete off the memorized Standing Order transaction or edit the transaction and change it into ‘Don’t Remind Me’.

Every month, you can print a P/L Report from this Fixed Assets Company file, to view the monthly depreciation amount and pass a General Journal in your actual QuickBooks company file. That is, Debit the depreciation expenses and credit the Accumulated Depreciation account.

2010_0119_04 Beside, you can also print a General Ledger report from this Fixed Assets Company file to have a full schedule on your fixed assets.

QuickBooks is an off the shelf software, if you are willing to think out-of-the-box, it can be a handy tools for you. Join my QuickBooks training class to have a better understanding of how QuickBooks can work for you.