 QuickBooks Online 2024 creating subaccounts and categories for fixed assets otherwise known as property, plant, and equipment, P, P, and E. Get ready and some coffee because we're gonna get the books on key with QuickBooks Online 2024. First a word from our sponsor. Yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our accounting rocks product line. If you're not crunching cords using Excel you're doing it wrong. A must-have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement the obligation a duty to share the tools necessary to properly channel the creative muse and the muse she rarely speaks more clearly than through the beautiful symmetry of spreadsheets. 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Here we are in our get great guitars 2024 QuickBooks Online sample company file we set up in a prior presentation opening up the major financial statement reports like we do every time the reports they're on the left we're in the favorites we're right-clicking on that balance sheet to open link in a new tab right-clicking on the PNL the profit and loss to open the link in a new tab repeating the process for the trustee trial balance then we'll tab to the right close up the hamburger change the range working in the first two months of jen of 2024 that's from 010124 tab 022824 we'd like to see the first two months side by side so we'll select the months run the report tabbing to the right closing the hamburger the ranges they are changing we're going from 010124 tab 022824 tab once again selecting months so we can see the side by side tabbing to the right repeating the process hamburger closed and the times they are changing 010124 tab 022824 tab are they changing for the better no i don't think so but we can always hope let's hit the months here we're going to run that report and then we're going to tab back to the balance sheet over here discuss the new process that we're looking at we're looking at the property plants and equipment down here otherwise known as the pp and e called the fixed assets for the account category in quickbooks might sometimes be called depreciable assets as we discussed before the fixed assets is an accrual type of account meaning even if you're on a cash based system you can't really get away from doing the accrual component when you're looking at something that is as extreme as property plant and equipment the classic example being like a building because when you buy a building even if you pay cash for it you tend to think well i'm not just going to expense the building we're not just going to have building expense for a hundred thousand dollars even if we paid cash for it because we instinctively know that if i tried to compare this year to next year with when i expense the entire building it wouldn't be a good comparison of actual performance of the business that's why we have the accrual kind of process so we would say okay we're going to put the building as an asset even though i paid for it like i paid for supplies and the supplies i would put on the books as supplies expense and why is that because the building is going to is going to be an investment it's going to be benefiting not just one period but multiple periods into the future and even if we wanted to expense it just for ease because it is the easier thing to do we can't really because the tax code at least in the united states forces us to put it on the books as an asset we also want to track it in a similar way as we do with the inventory inventory is typically something that can more easily be stolen we're more worried about people stealing our guitars and whatnot than our sofas or the actual building that the guitars are in however we still want a list of those assets because people those they're getting quite bold these days right they might just go into our our warehouse and drive out the forklift or something and just drive it down the freeway for all you know wouldn't be surprised these days you know so so we want to be able to track our fixed assets uh as well and have a list of what those fixed assets are in a similar way as we want to have with our inventory because those are their assets right they're things that we're holding on to that are going to help us to generate revenue uh in the future now you would think then that there would be a sub ledger within quickbooks to do that but generally that might not always be the case because the calculation of depreciation is quite complex so it seems uh not very efficient to try to have two sub ledgers one in quickbooks and one in the tax return and because the tax software is mandatory to have depreciation calculated in the united states on a tax basis oftentimes many small to mid-sized businesses will just simply use the tax software to calculate the tax depreciation and either use that tax depreciation as their books depreciation as well even though it's not ideal to do so from a bookkeeping standpoint because but it's the easy thing to do because then you don't need two depreciation schedules one for tax one for books or you can use the tax software to also calculate the book depreciation as well as the tax depreciation whatever methods you use in that however then you have a question of well how am i going to group my accounts in my quickbooks software and i would suggest you probably want to group it in the same format as the categories in the tax software because that's where your sub ledger will be supporting the actual things that you have on the books and the related accumulated depreciation so you might work with your accountant or tax preparer and say well what are the major categories that you have in the tax software and typically it's like furniture and fixture machinery and equipment and so on these categories being geared to the useful lives typically provided by tax law that's what the grouping is usually kind of designed around and so we're going to say let's group our stuff in the same format so that when i get the sub ledger i can look at the grouping of furniture and fixtures and the grouping of machinery and equipment there would be automobiles building typically and have those same categories tie into my totals here for furniture and equipment and so and furniture and fixture and then the equipment and so on and so forth so that's what i'm going to do now i'm going to imagine look we have everything in this one thing for furniture and equipment but my sub ledger in the tax software breaks out furniture and fixture versus equipment in a separate category it would be easier for me to tie out my books to the sub ledger if i mirror the sub ledger in our and our side so what we want so i'm going to do that now i'm going to say that the last purchase that we made was for five thousand dollars which was actually for machinery and equipment whereas the rest of it is actually furniture and i would like to break those two things out into their own categories all right so let's do that i'm going to go to the first tab think about how we might do that we'll go into our transactions and then i'm in the chart of accounts on the right hand side let's close up the hamburger and then i'll scroll down we're looking for the fixed asset type of accounts now quickbooks give gave us we already deleted i think some of them they gave us a whole lot of fixed asset accounts and sub accounts and whatnot and they have their rationale for doing that i think to try to give us an idea of what might fall into fixed assets but that's probably not the best way to actually group your fixed assets because again you want to group it in the same way as the sub ledger will be so you want to work with the tax software if that's going to be your sub ledger and so just be aware of that you might have to clean up the the accounts whereas if i for example if i go down to the to the expenses quickbooks also gave us a massive list of expenses but at least the expenses if you use their accounts that should work because the income statement will have the expenses on the tax return and you should be okay with the furniture and fixture it's going to end up being a mess if if you're using this for taxes and you do not tie out your furniture and fixtures to what's on the tax return because then when you try to calculate your depreciation and when you try to sell furniture and equipment or dispose of it you're going to run into like i say a mess so this is one of those things where i could try to find where like you might not think it's a big deal for the first few years but then you get five years into it and then you and then you realize that you need to sell or dispose of something and it's like then it's a mess okay so you want to get it right the first time this is one of those things major twice cut once what rather than tinkering okay so i've that's my spiel so i'm going to change the name of this one to furniture and fixture instead of furniture and equipment drop down edit and it's going to be called i'm going to call it furniture and fixture fixture because that's the category that's in my subletter subledger fixture fixtures i think it has an s doesn't really matter okay so let's save that and then so now i have that now i'm going to make another one called just equipment so i'm going to make another one that's just called machinery and equipment machinery and equipment that's another category so i'll just mirror that let's make a new one and i'm going to say this is going to be to do an asset account it's going to be a fixed asset property plant and equipment and i'm going to call it uh machine i'll call it it's a fixed asset and they've got all these categories for the fixed assets here there's machinery and equipment and then i'm just going to call it machinery and equipment so then we'll say save it so and i'm not so worried about the tax categorizations because i haven't found that the software is really great at just pulling into the tax software and everything just working beautifully you still have to do data input into the tax software i'll keep testing it and see if i get to a point where i think that works good but these are our two accounts now what i have here is everything on the balance sheet is in this furniture and fixture i'm going to say that the 5000 that we purchased last time was for machinery and equipment so i could go into this account and i could change the actual transaction i could drill down on this journal entry and change the account but i'd like to keep the audit trail which is typically the case and then make another journal entry to break it out to the proper balance so i'm going to use a journal entry to do that but because there's only two accounts impacted it's probably easier or we can just use the registers to do that so what i want to do over here is i want to move 5000 of it into machinery and equipment from furniture and fixture these are both balance sheet accounts therefore both have registers i'm going to use the machinery and equipment one because that's the increase so maybe it would be easier to think about the increase so i'm going to view the registers select the drop down i want to make a journal entry and we'll make it just as of the end of february 22824 and we're going to say that this is going to be to break out fixed assets in accounts that match sub ledger on tax software or something like that it's going to be an increase of 5000 the other side is going to go into furniture and fixture so this should just be a journal entry and this is a journal entry because we're there's no other form to do this obviously we there's there's no normal form for for recategorizing your fixed assets because that's not something that happens in the normal process therefore we default to a journal entry but instead of just entering a journal entry it might be easier to use the journal entry form with the registers as we're doing here all right let's save it and then boom it's been done let's go to the balance sheet and check it out i'm going to run it again run it and then so now we can see that we have 5000 in the machinery and equipment 98000 in the furniture and fixture and it went into this account with the use of a journal form if i go into the journal form it doesn't take me to the register but takes me to a journal entry with the debits and the credits i might copy the memo on both sides here so it's on either side that you care to look at and then let's go back okay so now in my sub ledger i can double check that i can be like okay does that make sense has since been made i think i have made sense because i took my dollar bill and exchanged it for pennies i don't i've made sense from okay i don't need a calculator because that adds up to 98000 right here and 5000 for my machinery and equipment and furniture and fixture so boom 98 and five that looks good we don't have to do anything to the accumulated depreciation as of yet in terms of the dollar amount because we've only had accumulated depreciation on the 98000 furniture and fixture not yet on the machinery and equipment but if there was stuff in the in the furniture and equipment or the accumulated depreciation for these accounts then you'd have to think about how you're going to deal with it now that now we have to deal with this account however so now we've got the accumulated depreciation notice over here what happens is we get each list of each item in the sub ledger which has its own calculation of depreciation because they were purchased at different points in time and then we get the total accumulated depreciation per category so this is the current month but we we currently have 7500 before the current period so so and then so then and then we have the same for down here so then the question is well i could over here the easiest thing to do is i just have one accumulated depreciation account for all categories but it might be better if we had just like mirror this so we have and accumulated depreciation for each category so that i can see both the purchase price the cost and the related accumulated depreciation the expensing of it the decrease in the value or the allocation of the cost to get also the book value per category so to do that i can use sub ledgers to kind of to kind of do that so let's let's do that method so i'm going to go back on over here and i'm going to go back let's open up the hand boogie let's go into our chart of accounts again and i'm going to say let's first make this accumulated depreciation i'm looking for the fixed assets i'm looking i'm looking i went too far i think uh okay assets and where are the fixed assets don't day for crying out loud a star there they are okay so now we're going to say that we have the accumulated depreciation so let's let's make this one a sub account now now here's the question here we could make one parent account for furniture and fixture and then have the sub account for the cost and then have the accumulated depreciation as under each of them so that the parent account doesn't have anything in it but we can try to kind of shortcut that i can try to say well i'm just going to use the furniture and fixture as the parent account even though there's something posted to it and then add the accumulated depreciation as the sub account so let's try that and see what it looks like so we're going to say edit this one and we're going to say that this is going to be so then i i also often will abbreviate this which is kind of ugly but accumulated depreciation is so long that it's easier to just say like a q acc d pre and then uh fixed assets now some would argue you don't even need to say accumulated depreciation if you make it a sub account of the of the other fixed asset account but i like to have it in there because it's easier for me to do the journal entries otherwise you've got multiple accounts with the same name that just are called accumulated depreciation which isn't helpful and you're going to have to change the name anyways because quickboats won't let you have two accounts with the same name but we're going to put it under furniture and fixture so there it is and let's check that out so let's save that and changing the type okay that's okay boom and see if i can find it now it took me back to the right place this time that's good so now it's a sub account let's take a look at it on the balance sheet so if i run it so now we can see it works out pretty nice this way because then the parent account also noticed that if i made a separate sub account called furniture and fixture and then i made two if i made a separate parent account called furniture and fixture and then two accounts underneath it called accumulated depreciation and cost then the accumulated depreciation ends up being on top of the cost due to the fact of alphabetical order right so this way actually works pretty nice because now the furniture and fixture is on top right even though the accumulated depreciation starts with an a so we have this and and you also eliminate one extra line otherwise there would be one extra line so you're you're also making your financials a little bit shorter doing that so this is the cost this is the accumulated depreciation for it and this is the book value which is great so i'm going to do the same format for the machinery and equipment although there is no accumulated depreciation yet posted but we will have it when we do the adjusting entries in a future course or section so let's get ready for that now so i'm going to do the same thing for the uh the machinery and equipment don't day for the deals for crying out loud meals this is my spanish it's half spanish half english deals meals deals for crying out loud meals i okay i'm going to make another so what i'll do here is i'm going to make another one and i'm going to say this is going to be uh a uh a fixed asset type of account so it's an asset and then we're going to make it under the fixed assets under machinery and equipment and so i'm going to call it machinery and equipment dude and then we're going to say here i'm just going to say acc d pre machinery and equipment i just think it sounds cool to acc d pre sounds better than accumulated depreciation it's the acc d pre that's what we're talking about here let's run it and so there we have it and so if i scroll down we've got the furniture and equipment and then these sub categories there as well so that's going to be the general idea if i go back to the balance sheet we run it again then we've got these nice sub categories nothing new happened here because there's nothing in the sub category yet but when i post to it as we will do in a future course or section in the adjusting entries then we'll have this drop down for each of them so now i'll be able to show total fixed assets and then each fixed asset category in terms of the cost as well as the accumulated depreciation and the book value per category or i can collapse each category showing just the book value per category so pretty fancy on that so that looks good all right and we'll also when we do that we'll do we'll do our adjusting entry with this form over here okay let's see where we stand in our trial balance let's go to the trusty tb run it we haven't done much new except for that one recategorization of the fixed assets if your numbers tie up to these numbers great if not try doing a date range change and see if that is the issue we've got the balance sheet on top of the income statement starting with the assets these are all assets cash accounts receivable inventory investment payments to deposit prepaid insurance the fixed assets the accumulated depreciation contra asset tied intimately to the fixed asset we basically took the fixed asset account and broke it into two halves so these that's why we get a contra account because it's part of another account doesn't really stand on its own leg it's just one leg or the other anyway machinery and then we have those are what the company has in terms of dollars not in terms of units then we have the other side of the coin who has claimed to the value of the assets we have then the liabilities and the equity first liabilities like the accounts payable the visa the state with the sales tax the government with i mean sorry the bank with the loans and then the government again with the payroll taxes and then unearned revenue we got some kind of deposit that we have not yet earned and then our portion as owners owners equity such as the investment similar to the capital or i'm sorry common stock if we were a corporation and then the owner's equity similar to retained earnings and then the whole income statement given us detail about one year of information typically for quickbooks and if we take the credits which are income minus the debits which are expenses we should get a net credit balance net income that could be thought of as part of the owner's equity or retained earnings if a corporation quickbooks doing that closing process for us on a yearly basis we can see if we bring it up one more year oh one oh one two five oh one oh one two five run it the whole income statement gets smushed together in owners equity the odometer of the income statement being reset at zero for the next trip starting in the next year all income accounts the temporary accounts of income accounts then resetting starting over owners equity similar to the retained earnings representing the odometer that's not being reset because it is the total distance that has been tracked in terms of one lump sum number over the life of the corporation net income over the life of the corporation less the amount that has been distributed out in the form of draws if a sole proprietorship dividends if it was a corporation