 QuickBooks Online 2023. Record purchase of fixed assets which might be called depreciable assets. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have Open The Sample Company. If you want both open at the same time we suggest using the incognito window or another browser which you can open by selecting the three dots in the browser if using Google Chrome and opening the incognito window then typing in the search engine. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. QuickBooks Online Test Drive. We're going to be using the sample company to look at the differences between the accounting view the view Get Great Guitars is in and the business view the one the sample company is in. You can change or switch between the two views you can toggle between them with the cog drop down and switch the view down below. Opening up a couple tabs to put reports in like we do every time right click in the tab up top to duplicate it right click on the duplicated tab to duplicate it again back to the tab to the middle as the one to the right thinking reports on down below we're gonna open the balance sheet report by the way the balance sheet report in the business view is under the business overview and then the reports and then we're going to go to the income statement tab to the right by going to the reports down below open up the income statement otherwise known as the P to the L the profit to the loss the income statement close up the boogie the hand boogie that is and then change that range from 010123 to 123123 tab run it to refresh it tab it to the middle there's nothing in it of course because we haven't done anything yet close up the hamburger not to the income statement that we've done lots of stuff what are you talking about we just haven't done anything for the income statement so 010123 to 123123 on the balance sheet that's the set up process that we do every time so in prior presentations we've been starting the new company file we entered beginning balances now we're thinking about those kind of transactions that often happen at the beginning of the business or possibly when expanding the business we can look at it with the accounting equation typically we need assets we need cash how do we get cash to start off when we're not generating it yet because the business hasn't really got going yet we've got to finance it with liabilities possibly loans or equity that's the money from us so that we can do what we can purchase property plants and equipment the things that we're gonna need to help us to generate revenue in the future which are recorded as assets but can also be thought as as a type of investment the reason they're in the business and not outside of it which is not just hanging on to it in our checking account or putting it in stocks and bonds is because we think we can get a better return on it so we had a transaction to increase the checking account for the investments and then we put some of that money into a short term investment just to hold on to hopefully getting some return on it as we then think about the purchase of the property and equipment that we're gonna buy and now we're buying the property plant and equipment now note that how much property plants and equipment you might need will of course be dependent upon the type of business you are in there's many businesses that people can start that don't require very much at all for the entry you can start a YouTube channel try to earn revenue you could start working on gig work and whatnot with very little upfront and that's great the problem with those types of businesses are that you have to have some kind of superior business model in terms of competing with competition because the barriers to entry are are much less so you're usually do you usually have more competition in those areas so you want to differentiate yourself somehow in those areas if you're in other types of businesses sometimes you need to buy of course equipment in order to really get your business going and so that's the next step oftentimes for starting the new business we raise the capital now we're gonna buy the property plants and equipment what is that that's buildings that we might need that would be the the equipment that we might need to purchase and the furniture for example we hear imagining we have a guitar shop that we're gonna sell guitars and we're going to be basically having guitar lessons will do in the future and rent out some equipment so notice of course what do we need well we need the shop we need to either rent it or buy a shop and then we're gonna need you know to furnish it in some way shape or form if we're gonna do guitar lessons we're gonna have to make it look nice within the place and then of course we need the equipment which we could purchase the equipment that we're gonna later sell and then have inventory of the equipment or and or have some equipment that we're gonna have on hand that we expect to be renting out and generating revenue and that in that way so that's the next thing we need to purchase we're gonna imagine that we're just gonna be putting our money basically into the furniture and fixture at this point so we're gonna say we're we're financing our shop that we're putting putting together now a couple of notes as we do this when you think about the transaction for purchasing fixed assets you might hit the drop-down again and say well what form is designated directly for the purchase of buildings or equipment and there is none there is no form why because once again we're on the set-up process of the business we're not on the day-to-day transactions we don't buy equipment all the time we only buy equipment every once in a while because they're large investments that are gonna have an impact hopefully to generate revenue multiple periods into the future so then the next question is well is cash affected in this case we're gonna say yes because we're gonna buy it with cash and therefore we can use an expense form or the register in a similar fashion as we did with the investment with the investments or a check form the forms that decrease the checking account but it's often the case that we finance equipment we buy it we take out a loan to purchase the equipment then there's not a form for that transaction specifically cash may not be impacted and therefore we might use a journal entry that's when we default to the journal entry because there's no other form that we would use that's the general thought process that we would want to go through so the next so we'll use the register to do this the next thing I just want to point out is your classifications for your fixed assets because if I go back to the first tab let's just check this out and go to their accounting down below so I can look at my register the chart of accounts and if I go over to the the other view by the way the business view just to check out where it's located it's under the bookkeeping and then the chart of accounts is right here let's check out the chart of accounts just so it is there and then if I close this out I can go down and say okay what did QuickBooks give me with regards to fixed assets they gave me a lot they got we had to add this one ourselves building furniture and equipment we changed the name I think and then land and then they gave me all the stuff down here under a subcategory of long-term office equipment now you might not want to format it this way this is where I would kind of have an exception to the general rule the general rule I would have would be that if QuickBooks has an account that looks relevant I'm going to use QuickBooks account if I don't like the name on QuickBooks account I'm going to change the name instead of adding another account so that I have two accounts that will be similar I don't want two accounts similar because I want to make sure that I record to one account consistently and then if they don't have an account at all I'll add a new account that's usually a good rule but I think for the fixed assets that you might want to deviate from that a bit and think okay how am I going to track the the tracking of my accumulated depreciation the depreciation of the assets and you might do that externally with tax software that might have a report that you could look something like this so I'll take a look at this in a second now first your thought might be I don't want to do that at all I just want to record my books on a cash-based system and not have to deal with this whole depreciation thing but most businesses can't do that because if I if I go back to the balance sheet even on a just a tax-based system if you have assets that are that are significant the tax code is going to force you to record them as an asset and then depreciate them in some way shape or form even if that's expensing them like as a 179 deduction in the year that you purchase them so you're gonna have to deal with it so instead of when I put this amount on the books that I purchase equipment I can't just expense it even if I paid cash for it because at the very least the tax code is going to force me to put it on the books as an asset it also makes sense to do that because if you're trying to compare like January the month of January to February on an income statement then if you bought a hundred thousand dollar piece of equipment in January that's going to last you 30 years then it doesn't make sense from an accrual standpoint to just expense the whole thing in one period because it makes that period look like you did really bad performance wise when compared to another period so that's why we have the accrual thing in the first place but even if you want to be on a cash-based system the the tax code is going to force you to do it the tax the tax-based system works well oftentimes but this is such a huge deviation from when you spent the money to when you're going to get the benefit that that's why you kind of have to forced into an accrual thing at this point in time okay so then we got to put the books here now if the tax code is going to force us to have a depreciation schedule then we might as well use the cash that the tax software as our sub ledger to track the depreciation and normally the tax software can can calculate both a book basis as well as a cash basis for depreciation so so that's generally what a lot of businesses will do especially small businesses you're going to rely on your accountant to to depreciate so you're going to record the increases in the furniture and equipment and then you'll do periodic adjustments possibly yearly or monthly of the accumulated depreciation based on the numbers generated from the tax software which is acting as your sub ledger in a similar way as the sub ledger for accounts receivable breaks out who owes us money by customer so that so that might look something like this and we'll dive more into this in a future presentation when we do adjusting entries but the idea would be when we purchase the property plants and equipment we're going to have to list out the things that we purchased as specifically as possible so that we can provide them to our accountant or a tax preparer who's going to put it into the tax software so that they can then record the depreciation on it and then they're going to tell us what the depreciation is periodically so that we can do an adjusting entry and and put it into our system that's going to be the general idea that means that i want the categories of my fixed assets to tie out to what's going to be on the sub ledger what's in the software so this software has furniture and fixture so i might want to change mine to say furniture and fixture it's got machinery and equipment so i might want mine to say machinery and equipment i don't want to have something different otherwise it's going to be difficult for me to coincide to what the tax software is going to do so that's what i would i would recommend you go into your accounts over here when you buy furniture and equipment and you ask your accountant what are the categories that you would like me to classify my equipment in and adjust your accounts to basically match those categories okay so i've gone on my rant there so having said that now we're going to just record the purchase of furniture and equipment so i'm going to go back on over here i'm going to use the same kind of register concept i could use either register i could go into the furniture and fixture register or i can use the checked register i think most of the time if cash is affected people think about the checked register is the way to go if it was going through a bank feed and you are using bank feeds as we'll do in another course or section then you can do a similar thing with the bank feeds which will record in essence and expense form all right so i'm going to hit the drop down we're going to add an expense form just like we did with the investment i'm going to say this is on 010923 everything's in 23 here right except for that okay and then i'm going to say it's office depot office depot now office depot is a little bit tricky if you're if you're purchasing from like an office supply shop because you might purchase a lot of stuff there that is supplies and then you might purchase other stuff that is is furniture and equipment and so you might try to mark off like a dollar amount as to when it's furniture and equipment or when it supplies and you also might even have it sometimes it's easier to actually have a different vendor name even though you purchase from from office depot for those transactions that are going to be larger or smaller possibly because then it'll start to memorize the proper expense account but let's but i'm just going to keep office depot here we'll talk more about that when we get to the bank fees this is a proper vendor because we're paying them and then i'm going to say office supplies so so office i'm sorry this is purchase of furniture now in the memo you might want to be more descriptive about exactly what you purchased the more detail we can get the better because i'm going to want to give this purchase to my tax preparer and i don't want them to put it on the books for their sub ledger as something generic let's say i bought for example all this stuff uh recall like this stuff was all bought together if they put it on their sub ledger as like one lump sum of just all the all these together and one line item and they just call it furniture then it's not going to cause a problem in the year of purchase but later on when i if i ever sell one of these items like the sofa if i sell the sofa or i dispose of it then i'm going to have an issue on how i'm going to record the the selling or the disposing of it because they grouped it together with all these other things right so what we want to do is we would like to ideally be able to tie out specifically by description and possibly number what it is we actually purchased and then put it on the books in our sub ledger which would be done by the tax accountant breaking out each individual item if you purchased it in a group so that when you sell it or dispose of it at some point in the future you don't run into a mess so the way you do that is every time you make a purchase and they don't happen that often because this is big purchases that don't happen all the time you want to be as specific as possible on the memo of what you purchase and possibly then attach to the purchase like the actual documentation to provide to your accountant so they can detail exactly what you got okay i'm going to just say here 18 000 and then this is going to go to furniture and equipment i'm just going to say i'm just going to type that in and it populates here notice that after we do this a couple times then it'll start to memorize possibly the the expense account here furniture and equipment that's where we run into this problem of something like an office depot where i might have two expense accounts that are hit by it sometimes and when we start to get into bank rules in particular you'll see that we got to be we can might be able to tailor our bank rules when we get into the the bank feeds to try to automate it based on the dollar amount as to whether it's going to go to one expense account or another so let's go ahead and save that so i'm going to save that let's go to our our balance sheet then and run it again run it jenni i'm going to go in and that's from forest guy i had forest gump in my head with the running thing again but we're going to go in here with the furniture so there it is it's an expense form that was used the other sides in furniture and equipment if i go into it then of course it's going to use an actual expense form now notice in this expense form you can go down to the attachments down here and possibly attach the actual documentation the pdf of the purchase possibly so that you can you can get the numbers of what you purchase and everything and get all the detail that you might want to provide to your accountant so they can put it on the sub ledger in the tax software and we'll talk more about the recording of accumulated depreciation in the adjusting entries in that section of course so i'm going to say okay let's close that out and then scroll back up back to the report the other side went to the furniture and equipment which is right here boom and we've got the expense form so once again nothing happened to the income statement note at the end of the year we're going to have to provide say this detailed report to the to the tax preparer which will give them the line-by-line items and then again you might want to give them the added documentation breaking out the actual purchases so they can accurately put it into the system this even after a year is not going to have too much detail in it nothing compared to not when compared to like a cash account because we don't purchase the equipment all the time it's not a day-to-day transaction so i'm going to go back up top and uh so there is that nothing's on the income statement okay let's do it again and i'm going to say we're going to buy another piece of furniture and equipment so i'll go back to the to the to the right i'll just enter it directly into here because we're going to pay cash for it again and the second month of data input will do more transactions that are non-cash related so we have to finance it in there we're going to do more transactions that are going to be using cash in the first month here so i'm going to say this is going to go for let's say it's on the 11th this time and let's say this time we bought it from amazon amazon i think that's how you spell it tab that's going to be a vendor proper vendor notice again we have this issue that i might buy multiple things from amazon including possibly supplies and sometimes large items which would go under property planting equipment i'm going to say this is for uh fixed assets and we once again might want more detail in the memo explaining exactly what we purchased seven thousand and then i'm just going to put this into the furniture and equipment the key here being because it's a large dollar amount and because we're going to have to depreciate it because the tax code requires us to we're going to put it on the books as an asset not expensive even though we paid cash for it let's go ahead and save it and go back to the middle tab and update run it again run it and then into the checking account and so there now we're building up our our data there is the transaction if i go into it it is an expense form i can add the documentation if i if i needed to so that we could we could give that to our accountant closing this back out scrolling up and so there is that the other side went into the furniture and equipment now having one hundred thousand in it so there it is going back up and back now there there's a couple issues with just that we talked we touched on earlier with the recording of the of the fixed assets notice it's in the drop down here because that drop down is by account type these two are fixed asset account types if i was to add multiple categories like equipment and then furniture and then building then the question is i'm also going to have a related accumulated depreciation account so you could have one accumulated depreciation account for all categories but oftentimes it's kind of nice to have a separate depreciation account per category that will line up to the categories of depreciation that are on the sub ledger that will be given to you or provided by your tax accountant hopefully remember that the accountant will have to do it on a tax-based system but they can usually provide also with their software since they're already doing the data input a book-based system as well you also have to think about whether or not you want your books done on a cash-based system or a book-based system with regards to the depreciation because a book-based system would be more proper but if you do a cash-based system then you don't have any of these differences between your books and the and the tax books so it's kind of a you know there's pros and cons so talk to your i would talk to your accountant when you're setting up your fixed asset accounts and how you're going to record depreciation and how they're going to be doing the tax software and whether their tax software has book depreciation and that kind of stuff so once you have the categories together then there's kind of an issue as to whether you want to have sub accounts to record the related accumulated depreciation to the fixed assets you can see here that we've got accumulated depreciation above the fern turner fixture it should be the other way around it's got that alphabetical order issue here which we could adjust with account numbers but that kind of means we have to use account numbers of course or we can try to adjust it with the sorting mechanism to see it in descending order so that we have it this way or we can use sub accounts and so we'll dive into that a little bit more especially when we get to the adjusting entry component for now let's look at the trial balance i'm going to go to the tab to the right right click on it duplicate that tab and then we'll open up the reports on the left check our numbers by going to the trustee trial balance i'll type it in here trial balance to trustee tb close up the boogie and range into the change you know one oh one two three to twelve thirty one two three and tab it to run it to refresh it scrolling in a bin a bit a bin and so this is where we stand at this point in time if your numbers match out to what we have then we're on the same page if they don't try changing the range it's often a date issue if you extend the range and then you see a difference you can drill down on the number and then drill down on the form and change the date you want to be careful of doing that in practice but it's okay to do in a practice problem and uh and then at the end of the process here or the end of the first month of data input we'll also take a look at the transaction detail report which sometimes is helpful for helpful for seeing any differences within the data input