Set Up & Calculate Depreciation in QuickBooks

QuickBooks helps you to plan and track your financial ledger of yours over time. An integral part of the process is ensuring that depreciation settings are properly configured in the program.

Once the depreciation value is set, calculating the worth of all the assets for the financial statements will become convenient. Configuration of these values could either be scaled or fixed.

How to Set Up & Calculate Depreciation in QuickBooks?

There are two methods available in QuickBooks to use the Depreciation option in QuickBooks.

1. First Method: Setting up Depreciation in QuickBooks

  • Firstly Go to the Chart of Accounts option. Follow the steps:
    • Discover the Gear button
    • Select and click on the Chart of Accounts
  • Hit on the new button located at the right corner of the page
  • Select the button Depreciation
  • After this, click on the Next option
  • It will display a dialog box
  • Write the desired Name and after that hit on Finish button

2. Second Method: Setting up Depreciation in QuickBooks:

To proceed with depreciation you need to import data from one Accounting Software to another. For instance: QuickBooks Desktop to a fixed asset manager. General Ledger does not import complete data in the FAM named Fixed Asset Manager; you need to move some content manually. Once done importing, perform the QuickBooks Fixed Asset Depreciation.

Here are the steps:

  • Open your QuickBooks Account
  • After this hit on the List option and then choose the Fixed Asset item list button
  • Choose the item button and then hit on the New
  • Enter all the required information
  • Once done, Hit on the OK option
  • The new item gets closed
  • Afterward discovers the fixed Asset Manager and follow the steps:
    • Initially, it will display an Asset Synchronization log window
    • Hit on the OK option
    • Choose the schedule button
    • Double-click on the created asset
    • It will open up data details
    • Locate the Federal column
    • After this scroll down to the row which says prior depreciation
    • Once done click on the appearing amount button
    • Afterward, you need to check and modify the required changes
    • The changes involve the other, ACE, State, AMT, and Book columns
    • Hit on the Save button
  • After this start exporting the fixed asset items in the ProSeries form 4562
  • Create the file with a form identical to QuickBooks Desktop
  • Here are the steps:
    • Firstly make the Fixed Asset Manager Assets
    • After this proceed with importing the QuickBooks FAM information to the Fixed Asset Modules
  • Locate Fixed Asset Manager file option
  • Hit on the Export button
  • Discover file list named Export ProSeries Tax Client
  • Click on the file option
  • Once chosen the client file hit on the button which says Export
  • Click on the OK option
  • Locate the ProSeries to display the status of the import
  • List of ProSeries form 4562 Amortization and Depreciation Schedule contains the assets
  • After this start importing Fixed Assets into Excel FAM. Follow the below steps:
    • Open the FAM
    • Discover File option
    • Click on the Import button from the further options
    • Hit on the CSV file
    • It will display a pop-up window on the screen
    • Now follow on-screen instructions
  • After this choose the basis for a journal entry posting. To do this, here are the instructions:
    • Open the Fixed Asset Manager
    • Hit on the QuickBooks option
    • Now choose Post Journal Entry to QuickBooks
    • The Option basic is used to post menu
    • Hit on the selected posting basis appears at the bottom of the screen
    • After this Post the journal entry
    • Moving General Ledger manually:
    • Firstly, allow the account to have Multiple Assets
    • Now add or modify the depreciation mode or setting.

How to Track Depreciation in QuickBooks?

To track the depreciation of assets in QuickBooks there requires the following two accounts:

  • Depreciation Expense Account
  • Accumulated Depreciation Account

1. Depreciation Expense Account

This account is used to monitor expenditure.

Here are the steps you need to follow to create it:

  • Choose the Gear icon
  • Hit on Chart of Accounts
  • Click on the New option appears on the top right side corner
  • After this determine the expenditure category provided below the other expense option
  • Provide required details below the depreciation tab
  • Give a suitable name for the depreciation that you need to track
  • Select it

Start calculating the depreciation using manual journal entries.

Here are the steps:

  • Click on the + option appears in the upper corner of the screen
  • Select the journal entry
  • When start filling the entry, the initial line is used to provide the depreciation expense account appears in the Account option
  • The total of the deduction that you recently calculated in the Debit
  • The account option that appears in the next line is for writing the value decrease in the asset
  • The credit button is to fill the asset depreciation sum
  • Once completed the entries are now saved it

2. Accumulated Depreciation Account:

This account is beneficial to maintain the information of the fixed assets.

Here are the steps:

  • Click on the Gear icon
  • After that Select Chart of Account 
  • Hit on the New option 
  • Now locate the category button, choose the Fixed Asset or Other Asset according to the requirement
  • Enter the suitable descriptions of the asset displayed in the list
  • Select and give a suitable account name
  • Once done this, it will display a question i.e. Do you want to track the asset depreciation?
  • Place a tick mark on the yes button
  • It will enable QuickBooks to create depreciation 
  • After that enter the initial costs in suitable fields
  • Hit on the finish option to complete the process

How to Use Calculate Depreciation in QuickBooks?

Use the planning & budgeting option of QuickBooks with decision tools to discover the depreciation expense. The depreciation does not need cash. It is a method to display the asset you are using.

Here are the steps useful in QuickBooks to calculate depreciation:

  • The initial step is to fill in the information related to fixed assets
  • Once you write the asset information the system will start calculating depreciation expense automatically through the straight-line method, and the double-declining balance method
  • QuickBooks uses all these three methods to perform depreciation expense calculations you can select the suitable one
  • After this save the details of the corresponding asset you referring to at the year-end to record the depreciation expense of the selected year
  • Make sure you have a configured setup before entering the data for calculating depreciation expenses.

How to Enter The Transactions in QuickBooks?

  • Locate the Gear icon
  • After this, hit on a journal entry
  • Choose the depreciation amount for the initial line of the Journal
  • Below the debit, write the depreciation amount
  • Click on the second button on the second line and click the asset’s depreciation amount
  • Below the credit option list, there appears a depreciation amount
  • At last hit on save button

Issues or Questions that users face while setting up or calculating the depreciation in QuickBooks

  • Wrong Assets are shown by the FAM file
  • How an asset is set up?
  • Is QuickBooks Desktop capable of calculating the depreciation automatically as per the preset schedule?

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  1. What does it mean by the depreciation in QuickBooks?

    Depreciation is what occurs when the value of a company asset is reduced over time. For instance, a work machine slowly depreciates down to $0 from its original purchasing price as it goes through its productive existence. There are strategies in the books of the company to calculate the value of those assets and display them.

  2. What and all the information do you require calculating depreciation?

    Here is the information that you require while calculating depreciation:

    💠 Asset Useful Life: This information is available in tables, depending on asset type. You’ll also need an accountant to tell you a specific asset’s useful life.
    💠 Minus the salvage value: Minus the salvage values at the end of the useful life of the asset. The salvage value is determined by a table, as is the useful life.
    💠 Divided by asset cost: This covers all asset acquisition costs, such as transportation, configuration, and training.

  3. How do I calculate depreciation in QuickBooks?

    Follow this process that helps you to calculate depreciation in QuickBooks with ease:

    💠 The very first, login to your QB application 
    💠 Next, go to the Toolbar and select the “Lists” menu
    💠 Now, hit the “Chart of Accounts” option 
    💠 Double-click on the sub-account on which the depreciation item is listed
    💠 After that, choose the account that you’re using to record the asset depreciation in the appropriate account field
    💠 Enter the amount in a dollar that you wish to claim on the particular item as a “reduce” within the account register 
    💠 Press the “Save” button 
    💠 In the end, you can depreciate other items if you wish or exit the account.

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