QuickBooks defines capital equipment as equipment a company purchases, such as manufacturing equipment, furniture, or office machines that has a lifespan of greater than one year and that affects the net worth of the business. QuickBooks regards capital equipment as a fixed asset and requires the user set up a fixed-asset account and an account to use for tracking depreciation with items in this category.
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Things you need
- QuickBooks Pro, Premier, or Enterprise
- Capital equipment information
Open QuickBooks. Click on “Add New Account” window. Choose “Lists” from the QuickBooks main menu, and then click “Chart of Accounts.” Click the “Account” drop-down box, select “New” to open the “Add New Account” window, and choose “Fixed Asset” as the account type.
Enter fixed-asset account details. General information you will enter includes a name and description, an optional number for the asset if your company uses a numbering system for inventory purposes, and any notes you want to enter. Information you may want to include as a note is information you may need later, such as contact information for the sales person, and serial or model numbers for the item or replacement parts numbers. If you will be exporting your financial information to tax preparation software, map the fixed asset to a tax category by clicking the drop-down box and selecting the correct tax schedule and description, such as Schedule C: rent/lease vehicles, equipment. Do not enter an opening balance at this time.
Save the new fixed-asset account. Click “Save & Close” to exit the “Add New Account” window and return to the Chart of Accounts. The new fixed-asset account will appear at the top of the accounts list.
Record cash payment. If you write a check to pay for the item in its entirety, select the fixed-asset account from the Account drop-down box within the check register to assign the value to your fixed-asset account.
Create a liability account to track the loan and add the opening balance to the asset account. Open the “Add New Account” window. Select “Other Account Type.” Choose “Long Term Liability” from the drop-down list that appears.
Fill in account information. Enter general information, map the tax line if necessary, but do not enter an opening balance. Click “Save & Close” to exit.
Add opening account balance. Double-click the fixed-asset account to open the account register and record the loan by adding the payee and loan amount in the register window.
Create a Depreciation Expense parent account. Access the “Add New Account” window, select “expense” for the account type and give it the name “Depreciation Expense.” Click “Save & Close” without entering any additional information.
Create Depreciation sub-account for the fixed asset. Access the "New Account" window, select "expense" for the account type and name it according to the asset you purchased. For example, if you purchased equipment, you should name the sub-account "AccumDepr-Equipment." Place a check in the "Sub Account of" box and select "Depreciation Expense" as the parent account.
Record depreciation using Journal entries. Click “Company” from the QuickBooks main menu, and then select “Make General Journal Entries.” Create a debit entry for the depreciation account and a credit entry for the fixed asset.
Tips and warnings
- If you need assistance in determining what constitutes a fixed asset you can open a default QuickBooks sample file included in your installation from the “Lists” tab on the QuickBooks main menu and view a sample “Fixed Asset Item List.” To open a default products or services sample file, close the company file you are working in by clicking “File” and “Close Company.” When a “No Company Open” window appears, select “Open a Sample File” and place a check next to either the “Products” or “Services” sample file.
- If your company uses a numbering system to record fixed assets for inventory purposes, check with management to obtain the correct number before adding it to the asset record.
- If you make a down payment for a portion of a fixed asset and take out a loan for the remainder, record the down payment when you create the opening balance for the loan. Click the “Splits” button to separate the cash and loan transactions.
- If you use an outside accountant to assist you in tax preparation, check with your accountant before adding accounts or mapping tax lines.
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