Recording of depreciation expense

Recording depreciation expense in QuickBooks involves creating journal entries to reflect the decrease in the value of your assets over time. Here’s how to do it:

Step 1: Determine Depreciation Method:

Before you can record depreciation, you need to determine the appropriate depreciation method. The most common methods are straight-line depreciation and declining balance depreciation. The method you choose will depend on your accounting practices and tax regulations.

Step 2: Create a Journal Entry:

1. Go to the QuickBooks homepage.
2. Click on the “Create” button (usually represented by a plus “+” sign) at the top of the screen.
3. Under the “Other” column, select “Journal Entry.”
4. In the journal entry:
   • Debit an appropriate depreciation expense account (e.g., “Depreciation Expense”) for the calculated depreciation amount.
   • Credit the corresponding accumulated depreciation account. Each asset should have its own accumulated depreciation account (e.g., “Accumulated Depreciation – Equipment”). This account represents the total depreciation taken on the asset.
   • Provide a description to indicate the asset being depreciated, the period covered, and any other relevant details.
5. Save the journal entry.

Step 3: Calculate Depreciation:

Depreciation is calculated based on the asset’s original cost, useful life, and any residual value. The calculation formula for straight-line depreciation is:

Depreciation Expense = (Cost of Asset – Residual Value) / Useful Life

For declining balance depreciation, the formula is more complex and involves a fixed percentage.

Step 4: Periodic Recording:

Repeat this process at regular intervals (e.g., monthly or annually) to record the depreciation expense for all applicable assets. Be sure to update the asset’s accumulated depreciation account each time you make a depreciation entry.

Step 5: Review Your Financial Statements:

After recording the depreciation expense, review your financial statements to ensure they accurately reflect the depreciation of your assets. The depreciation expense will be reflected on your income statement, and the accumulated depreciation will be on your balance sheet, reducing the book value of the assets.

Recording depreciation is important for accurately representing the decrease in the value of your assets over time, and it helps you maintain accurate financial records. It’s a good practice to consult with your accountant or financial advisor to ensure you’re using the correct depreciation methods and to address any specific accounting or tax considerations for your business.