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Subject Author Date
how do i change from an expense to depreciating? kyle 10-12-2006
Posted by kyle on October 12, 2006, 1:23 pm
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my company (owned by me) bought a work-exclusive laptop for me, the
employee. i, not really knowing, put this in an expense account -
computer related office supplies. well, as i've been reading more and
more, i should have depreciated this. how do i change this without
messing up any of the reconciliations i've done?

many thanks,


kyle


Posted by HeyBub on October 12, 2006, 6:36 pm
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 kyle wrote:
> my company (owned by me) bought a work-exclusive laptop for me, the
> employee. i, not really knowing, put this in an expense account -
> computer related office supplies. well, as i've been reading more and
> more, i should have depreciated this. how do i change this without
> messing up any of the reconciliations i've done?
>

A business MAY expense items, instead of depreciating, up to about a zillion
bucks under the current tax laws. Whether to expense or depreciate then
becomes a tactical decision. If you're making big bucks this year, it makes
sense to increase expenses. If you're not making much this year, but plan to
do so in the future, perhaps you should depreciate.

On the other hand, if you expense it now, and your company has a loss, that
loss can carry forward.....



Posted by Joanne on October 12, 2006, 7:10 pm
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> kyle wrote:
>> my company (owned by me) bought a work-exclusive laptop for me, the
>> employee. i, not really knowing, put this in an expense account -
>> computer related office supplies. well, as i've been reading more and
>> more, i should have depreciated this. how do i change this without
>> messing up any of the reconciliations i've done?
>>
>
> A business MAY expense items, instead of depreciating, up to about a
> zillion bucks under the current tax laws. Whether to expense or depreciate
> then becomes a tactical decision. If you're making big bucks this year, it
> makes sense to increase expenses. If you're not making much this year, but
> plan to do so in the future, perhaps you should depreciate.
>
> On the other hand, if you expense it now, and your company has a loss,
> that loss can carry forward.....

As your tax preparer will explain, all methods of dealing with capital
purchases are depreciation methods. "Expensing" is actually an election to
accelerate depreciation and must be reported on the depreciation form.
Simply expensing it could result in the loss of the deduction entirely.

I would move the item from and expense account to a fixed asset account so
that it can be handled correctly.

Going back to the check you wrote to pay for the item and making the change
can be done.

--
Sincerely,
Joanne

If it's right for you, then it's right, . . . . . for you!!!

http://www.jobird.com



Posted by kyle on October 13, 2006, 8:35 pm
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Joanne,

Thank you for the response!

According to the qb manual, I have setup:
Fixed Assets:
-> Computers
---> Cost
---> Accum. Depr.
-> Office Equipment
---> Cost
---> Accum. Depr.

Then I went back to vendors>enter bills and located my printer, for
example, and put it in Office Equipment:Cost.

Is this correct?

QB then said create a depr expense account...

but I don't understand.. am I suppose to manually calculate each fixed
asset each year (i want to do it once a year) and then put the total in
depr. expense account? How does it automatically get in accum. depr
fixed asset account?



Joanne wrote:
> > kyle wrote:
> >> my company (owned by me) bought a work-exclusive laptop for me, the
> >> employee. i, not really knowing, put this in an expense account -
> >> computer related office supplies. well, as i've been reading more and
> >> more, i should have depreciated this. how do i change this without
> >> messing up any of the reconciliations i've done?
> >>
> >
> > A business MAY expense items, instead of depreciating, up to about a
> > zillion bucks under the current tax laws. Whether to expense or depreciate
> > then becomes a tactical decision. If you're making big bucks this year, it
> > makes sense to increase expenses. If you're not making much this year, but
> > plan to do so in the future, perhaps you should depreciate.
> >
> > On the other hand, if you expense it now, and your company has a loss,
> > that loss can carry forward.....
>
> As your tax preparer will explain, all methods of dealing with capital
> purchases are depreciation methods. "Expensing" is actually an election to
> accelerate depreciation and must be reported on the depreciation form.
> Simply expensing it could result in the loss of the deduction entirely.
>
> I would move the item from and expense account to a fixed asset account so
> that it can be handled correctly.
>
> Going back to the check you wrote to pay for the item and making the change
> can be done.
>
> --
> Sincerely,
> Joanne
>
> If it's right for you, then it's right, . . . . . for you!!!
>
> http://www.jobird.com


Posted by Joanne on October 13, 2006, 8:50 pm
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> Joanne,
>
> Thank you for the response!
>
> According to the qb manual, I have setup:
> Fixed Assets:
> -> Computers
> ---> Cost
> ---> Accum. Depr.
> -> Office Equipment
> ---> Cost
> ---> Accum. Depr.
>
> Then I went back to vendors>enter bills and located my printer, for
> example, and put it in Office Equipment:Cost.
>
> Is this correct?


Exactly correct.


>
> QB then said create a depr expense account...
>
> but I don't understand.. am I suppose to manually calculate each fixed
> asset each year (i want to do it once a year) and then put the total in
> depr. expense account? How does it automatically get in accum. depr
> fixed asset account?


I enter depreciation at year-end after the tax return depreciation schedule
has been prepared.

To be more correct, an estimated amount of depreciation monthly can be
recorded to:

debit - Depreciation Expense
credit - Accumulated Depreciation

to give the Financial Statement a more accurate picture of the company's
profit.

The books would then be adjusted at year-end to agree with the tax return.

--
Sincerely,
Joanne

If it's right for you, then it's right, . . . . . for you!!!

http://www.jobird.com



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