QuickBooks Online 2021 adjusting entry related to depreciation in QuickBooks, let’s get into it with Intuit QuickBooks Online 2021. Here we are in our get great guitars practice file, we’re going to start off by duplicating our tabs up top and running a few reports. So we’re going to go up top duplicating the tab by right clicking on it so that we can then duplicate then we’re going to duplicate that process by right clicking and duplicating again.
And then we’re going to duplicate that duplicated process to right click on the tab, and duplicate again, then we’re going to be creating the trial balance here, followed by the profit and loss or income statement and then the balance sheet. Go into the reports down below on the left hand side that we’re going to be typing in the good old trusty trial balance the good old TV to start off with range changing, ending point being Oh 228 to one and then run that report.
And let’s close up the hamburger hold down Control, scroll up just a bit to get to that one to five. That’s where I like to be. And then we’re going to go to the next tab to the left down to the reports on the left. And this time, we’re going to be opening up the P and L Profit and Loss income statement range change up top ending at oh two to eight to one and run it, close the burger and then go to the left of that one.
Next tab on over go to the reports down below. This is the one where we want the balance sheet, the good old balance sheet here, ranging the changing up top at oh two to eight to one, and then running that report closing up the hamburger, we’re now looking at the adjusting entry related to the accumulated depreciation. And note that we went over kind of the difficulties in the prior presentation in terms of how do we want to group the accumulated depreciation who’s going to calculate the accumulated depreciation?
Are we talking about accumulated depreciation on a book basis? Or a tax basis? Do we want to record it differently on our books versus the tax? Do we want to do this on a yearly basis? Or do we want to do it on a monthly basis. So we discussed some of those options in those questions in the prior presentation. Once you actually know what the what the depreciation is per category, then it’s pretty straightforward to then just straight calculate it and enter the adjusting entry.
Just note that, you know, the depreciation expense is one of the adjusting entries that you may not be able to do as easily without the help and assistance from like the tax preparer. In other words, if you enter the depreciation entries, it’s not going to lessen the amount of work possibly that needs to be done by the tax preparer, because they still need to enter the data related to the purchases and whatnot, so that they can run the depreciation calculations on a tax basis.
And therefore, it might be easier just to rely on the tax software and possibly the tax preparer to help calculate and record the depreciation tables, which then we’ll be used to enter the information into the system. So we looked at the depreciation tables last time, this is our book basis depreciation table where we laid out the detail of the purchases that we have, once we have this, then we can just enter the adjusting entry, either monthly or yearly with just a normal journal entry, adjusting entry. Remember that you may want to record this on a book basis or a tax basis.
Depending on what your needs may be, we’re gonna record it but basically over here thinking about a book basis, basically using straight line depreciation for our depreciable assets. So we’ve done this in Excel already. So we have the information that we input into Excel here, we’re just going to mirror that now. As we enter it into our QuickBooks systems.
Let’s go on back on over to the QuickBooks also just realized that when we’re caught when we’re putting our categories together, you probably want to line up your categories, something like the fixed assets, the furniture and the fixed end equipment, the automobiles to the same categories that would be on the depreciation schedule categories, possibly in the tax software, so use the same grouping most likely will be the easiest thing to do. And then and then you got the question of do you want to have separate accumulated depreciation per section, so that you can look at the book value per section, for example, book value for the furniture and equipment here?
Or do you just want to have one accumulated depreciation account, which would be the easiest thing to do, and just calculate all depreciation kind of as if they’re grouped together in one account. That way you don’t have the ability to see the book value per section per category, but it’s easier and you can see the book value for the entire group. What we did here is we’re going to set up our two categories that we have fixed assets under fixed assets, equipment and furniture and equipment, and then give us the sub account the related account, which is going to be the accumulated depreciation tied to each of them.
We don’t see one here for the Equipment because this is the first period in which we’re going to record the accumulated depreciation, and then we have it down here for the furniture where you could see, this would be like the book value, I can condense it. And then if I hit the old drop down, we’ve got the accumulated depreciation then underneath it.
So we already have our information over here, remember that these schedules though, are going to be on a yearly basis, typically, if they’re coming from your tax preparer, if you’re going to record them monthly, then you’re gonna have to break these down to monthly totals, we’re gonna be recording the depreciation because we didn’t do any calculation for the first month, we’re going to record this for two months time period, as of February. So note that we could we should probably break it down for month one and do an adjusting entry in January and then February, but we’re just making everything correct as of the two month ended in February in this case.
So that means that we had our calculation here where we took the depreciation for the current period 1401 divided by 12 months, that would be a monthly times two, that’s going to be there 233 3.5 for that category, and then on the machinery and equipment, we got the total 833 divided by 12 times two, it’s going to give us our 138. So notice, we’re not calculating the depreciation per thing that we bought, even though that is done for us. And we need that information on the depreciation schedule. But oftentimes, that can be done by the tax preparer who can then you know, needs to enter that information to do the depreciation schedules for taxes, and therefore can give us this information.
So we can use it to us the basis for our calculation. So let’s go back on over to then QuickBooks, I’m going to go to the first tab, let’s start off going down to the accounting tab down below. And then I’m going to close up the hamburger Hold CTRL scroll down to like 110. And then if I scroll on down here, notice our setup, we’ve got the equipment account as a fixed asset type of account. And then we set up an accumulated depreciation, I abbreviated it as ACC decrease, so it’s not this huge long line item, and then equipment next to it.
Notice that you don’t need to really repeat equipment, if you would rather just have the full name accumulated depreciation as a sub account of equipment, you can do so. But I like to have the name in there so that when I when I record it, I could see it, but it’s gonna it’s gonna show on the report as a subcategory here, so so you don’t really it’s kind of redundant. Some might say, to put the equipment there, we did the same for the furniture, we got the furniture, and then the subcategory of the accumulated depreciation right underneath it.
So now we’re going to record our journal entries. And it’s a straightforward journal entry to record, we can do so by going to the New button up top and go into journal entry. But because they only have basically two accounts affected, it might be easier to just use our registers. So we want to use the register, which will be the accumulated depreciation account because it’s it’s a balance sheet account, as opposed to the expense account, which would be the depreciation expense Expense Type of accounts down below. So we’ll do that.
Before we do however, notice that we don’t have any expense account for depreciation expense down here, we don’t have one set up yet. Now we have the same kind of thing. Even though we broke out these two, these two categories up top as two separate accumulated depreciations, we could still just record them to one depreciation expense account, which could be the easiest thing to do, which is group it all into one depreciation expense account.
But again, you might want to you might want to depreciation expense accounts so that you can break it out by category, the depreciation expense related to the equipment and the related to the furniture in our case. So I’m going to do that I’m going to make two depreciation expense accounts. To do that, I would like to have a depreciation expense account down here at the parent account, and then show the sub accounts so that I have the ability to show it just as one line item, or as the two line items in detail. So let’s practice that I’m going to I’m going to add three accounts here, one being the parent, two being the sub accounts of it.
So I’m going to say let’s add a new account. I’m going to call this and expense type of account. And we’re going to say this is going to be depreciation. So did they have a depreciation account here, I’m just going to call it other expense. Let’s go at other business expenses, let’s call it depreciation, the depreciation if I misspell any of this, I apologize in advance, and then I’ll save it and close it. And so there’s that that’s our parent account. Let’s make another one.
So I’m going to make another one. And this is going to be an expense type of account. And this is going to be other I’m going to say other again other business. And then this is going to I’m going to call it D pri I’ll try to abbreviate it this time because it’s going to be a sub account. And then I’m going to say equipment, and that’s going to be a sub account of the depreciation account we set up depreciation so Now that’s going to be underneath it. So I can have the detail if we want it in that format, and so it says, not a valid name, I can’t have a colon in it, no colon.
All right? Whatever depreciation, I’m going to put a dash then dash. Is that all right? Is that okay? QuickBooks. And so then if I scroll down, so there we have the sub account. Now let’s try it again, I’m going to go up top and say new. And then this is going to be an expense type of account. And then I’ll make it an other again, other expense. And this is going to be the pre dash furniture. And then this is going to be a sub account of the depreciation account as well. So we’ll save it, close it. Very nice. Alamosa looks good. And so there, what happened to it should be down here. So there it is. So there they are. Okay, so then.
So now we can record our journal entry. So let’s do it, we’re going to go up top and do it in a register type format. Let’s do the equipment first. So I’m going to go into the register for the accumulated depreciation. And we’re going to be adding, adding the item here. Now this one’s a little confusing, I’m going to do it with a journal entry. But because it’s a contra asset account, this is where the plus and minus isn’t as good as debits and credits. Because it’s a contra asset. So do Is that an increase? Because an increase would be an increase to the, to the credit accounts.
So I would think personally, it should be an increase. But I think QuickBooks sees it as a decrease, because even though the accounts going up, it’s decreasing assets, because it’s an contra asset type of account. So if you go the wrong way on it, then you know, you just go back in there and fix it, it’s not a big deal. But it’s a little confusing. That’s why debits and credits are better, but whatever. And so we’re going to say that this is going to be a j e six. So it’s called a j, e. Six, and this is going to be then I’ll just call it a j, e, sits here too, and we’re gonna have a deep, I’m gonna cut, I think it’s a decrease. And we’ll pick up the number of 138, point eight, three.
So we’re gonna say 138, point eight, three, other side is d pre, for the equipment, there it is. And let’s go ahead and save and close it, see if we went the right way with it, by going back to our chart of accounts. So there we have it. So there we have it here. Let’s go to our balance sheet now and check it out, I’m going to hold down Ctrl scroll up just a bit to get about one to five freshen up the report. So we’re working with fresh stuff. And then if I go down, we’re gonna say there’s the 5000.
And there’s the 135 underneath it, so we went the right way, because it decreased it like if this was increasing the balance here, then that’s doing the opposite of what we should be doing. Because the accumulated depreciation should be a contra asset account. So notice, if I minimize this screen, now we’ve got the fixed assets we could see in like in one line item, because that’s the type of accounts we’re using. If I maximize this, we can minimize these items. And I can say this is the book value, say, of the equipment account.
And if I want to see then the detail of it, I could say, well, we bought it for 5000. And then this was the accumulated depreciation related to it decrease in it to give us the book value of the 486 117. So you can see you can give us some more detail. That’s one way that you could set it up, which is kind of kind of nice. And then if I go then to the income statement, the PnL and I fresh in that report up running it going down, then we have down here in the depreciation now I got the depreciation category drop down parent account, that’s why I have a drop down because there’s a parent and I could collapse it and say, hey, look, that’s just depreciation that I can give us depreciation per category.
If you want to have that notice how much more space it takes to to add these sub accounts. So they have pros, they have cons to add a bunch of sub accounts, but they can be nice. And if I wanted to show that to not sure the detail, and I like the detail personally, but you don’t like the detail, then we can collapse the sub accounts. And then we just have the depreciation expense here. And we don’t have them so the sub accounts can be can be nice. So then we’re going to go back on over record the other one. Let’s do the other one. This time. This was for the furniture now furniture. So I’m going to go to the furniture account.
Once again, I’m in the accounting tab, we’re in the chart of accounts closing up the hamburger, we’re going to go then I’m scrolling down to 110 furniture accumulated depreciation probably should have started with this one because I could see that it’s a it’s a negative here so I can see which way we should be going. So I’m going to say journal entry. We need another one journal entry as of the cutoff Oh to 20 eight to one. And this is going to be a je seven. So we’ll keep it at a G seven here. And then this is going to be a G seven, it’s actually, this was kind of I should, I’m going to make it 6.5, which is confusing. But now, let’s keep it at a G seven, g seven 6.5. That’s silly. But an Excel worksheet, I need to add another one here, A, A j, e seven.
That’s how we’ll do it. Okay, so then we’re going to say this is going to be a decrease, and this is going to be the 233 3.50. So we’ll say this is decreased to 333, point five, zero. And the other side is going to go to depreciation of equipment of furniture, this one the subcategory. And I think that’s right, so I’m going to save it and close it. And I could see it’s going the right way. There’s the 983 3.5, which I think matches what we have here. So 983 3.5. So that looks correct. So far to me, let’s go on over to our reports here, balance sheet, let’s freshen it up.
So we have a fresh report, and hold down Control, scroll up just a bit. So now we’ve got we can say hey, here’s the total fixed assets. And that’s, you know, that book value. And then I can expand that and say, and here’s like my equipment and the furniture. And if you want to know the detail on the furniture, we can hit the old drop down here and say, We bought it for 98,000 accumulated depreciation, the 983 3.5, to give us the book value of 88 166 50. And then we can go to the to the income statement over here, and freshen it up, run it so it’s fresh, and then scroll down.
And we could say that we have the depreciation with one line item, this is total depreciation for the time period thus far, and then open it up and the categories are for the equipment, and the furniture and fixture. That’s how we got to that total. And so there we have that, let’s compare it on out to our Excel sheet over here, back to the balance sheet, let’s let’s expand everything and say balance sheet. And let’s go back up and say we should have 5000 in the equipment. So 5000 in equipment ties out 5000 Then we’ve got the 138 83 accumulated depreciation 138 83.
If I sum those up, that comes out to the 486 117 which I can highlight these two to check it here. 486 117. And then we should have 98,000 in the furniture 98,000 in the furniture, accumulated depreciation 983 350. So we’ve got the 983 350. And then if I combine those, we’re at the 88 166 50 book value, which is the cost minus the accumulated 816650 book value. Is that the same number of I can’t remember. Yeah, it totally was, I know it was. And then if we go if we go to the income statement, then then we have we just saw the two down here on the income statement, but we got the 183 83 and then 233 3.5. So if I go down to the income statement, this one looks right.
And then if I sum them up, we’ve got the 247 233. And then if I collapse this one, we got the 247 233 back on down to the bottom net income now calculated at this 696085. And that then if I go over here 696085 for the income thus far everything’s tying out. Looks perfect. Let’s go back on over and just check one more. We got the good old trial balance. And let’s freshen that one up. This is where we’re standing at this point in time so you could check it out here. I’ll also print it out so you can look at it as opposed to on our time on your own time.