Basic Accounting

Everything you wanted to Know about Basic Accounting but were afraid to ask

Fixed Assets And Quickbooks

I. Definition of a Fixed Asset

Using the acronym T.I.M.E. we can define a fixed asset pretty easily. A Fixed Asset is Tangible. It is real property, you can touch it. Items like goodwill are intangible. Goodwill is the amount a person would pay over the actual value of a business because of it’s good reputation, location or name. There is no definitive amount that can be assigned to the goodwill category in any transaction as it is a subjective value.

A Fixed Asset is Inventory NOT!. Okay there’s a little bit of license taken with this one, but otherwise, the acronym doesn’t work. Inventory is not a fixed asset and should never be considered as such. Inventory is part of the Cost of Goods Sold account.

A Fixed Asset is Material in value. I had a client at one point that tried to depreciate a $300 software package for ten years. If the asset is under $500, put it in as an expense not a fixed asset. If it is over $1000 it should be depreciated. Amounts in between can arguably go either way depending on the asset itself. Ask your tax professional for the best advice.

A Fixed Asset’s Estimated Life Span is greater than 1 year. In other words, printers, computers, vehicles, buildings all last longer than one year (unless it’s a Ford) okay that was a joke. If the asset isn’t expected to last longer than one year, it is not a fixed asset.

II. Fixed Asset Cost

Go to the List menu and click on the Chart of Accounts to open it. Hit CTRL and N for a new account and select fixed asset. Ideally this is done in the year of purchase when entering into Quickbooks, if it is not, then click on the opening balance and enter the cost of the fixed asset at the time of the purchase.

I find it helpful to actually create one fixed asset account for the item and to enter the cost and other information in a sub-account u Read more

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