QuickBooks Online 2022 sub accounts categories for fixed assets or depreciable, assets, property, plant and equipment PP and E, get ready because it’s go time with QuickBooks Online 2022.
There we are in our get great guitars practice file, we set up with a 30 day free trial holding down control scrolling up a bit to get to the one to 5% currently in the homepage, otherwise known as the get things done pay.
Change to the accountant view, it is something that you can do by going to the cog up top and going down below to the switch to the accounting view, we will be toggling back and forth between the two views either here or by jumping over to the sample company currently in the accounting view.
Going back to the get great guitars going to open a few tabs up top by right clicking on the tab up top, duplicating it back to the tab to the left right clicking on it, duplicating it. Again, we plan on putting some reports in those tabs.
As they are thinking, let’s jump on over to the other company so that we can look at in the accounting view where the reports are located, which are on the left side under Reports.
Let’s go back on over to the business views second tab, the thinking has been done. The reports are located in the Business View in the business Overview section and then in the reports closing up the hamburger.
Report ranging changing up top from Oh 101 to two to 1231 to two and run it, go to the tab to the right tab to the right, go back down to the business overview. And in reports close it up the hamburger opened up the other the other financial statement report the income statement,
the profit loss, the p&l reigns change from Oh 101 to two this time 202 2008 to two. And let’s see if we can change this to see the months. So we can see the month by month side by side running it.
So we’ve got Jan Feb tote and the side by side view we’re currently working on February, I’m going to go back to the first tab. And note that down below we’re focusing in on our fixed assets area down below. Now when you first set up a company file, then QuickBooks will give you some suggested items for the fixed assets, which could also be called property, plant and equipment, or PP and E.
And this is a good area for us to kind of practice alternative things that we can have with regards to the demonstration or the reporting of items with the use of sub accounts. Now with the fixed assets.
Note that you’re typically going to be tracking the detail on them with your accountant. And the fixed assets themselves are an accrual kind of component. So you might be saying I’m on a cash basis, I don’t want to do any accrual stuff. But sometimes it’s unavoidable.
And this is typically one of those times because even if you paid cash for like a building, and you paid 100,000 cash for it, and it was a business office building, you can’t just expense it for tax purposes, typically,
you got to put it on the books as an asset, and then depreciate it for tax purposes. So the tax code, if nothing else, will not allow you to stick to a cash basis at least with regards to property, plant and equipment.
Typically, now the tax code is typically going to be different than what you would depreciate if you were choosing to depreciate under a method not driven by the tax code.
So that depreciation method that you choose to use for bookkeeping versus tax is something that you might want to discuss, of course, with your accountant. But that leads us to the issue of doing this accrual kind of components. To do an accrual kind of component, it’s a little bit more work, we got to put it on the books as an asset.
And then we’ve got to depreciate it over its useful life, we’ve got to track the assets, then on a sub ledger, which you would think then QuickBooks would have a sub ledger to track the assets by the actual assets that we have.
But oftentimes, we don’t do that within QuickBooks, because it might be easier to do oftentimes is with tax software, because there could be multiple depreciation schedules, one of which we’re going to have to do is to tax depreciation schedules,
which is better or more easily maintained with the tax software. And we don’t really want to do to quite complicated depreciation schedules that are in two separate systems.
So oftentimes, we’ll be dependent on the tax software on the accountant to help us out with the adjusting entries with relation to the depreciation expense that we might do periodically at the end of the month, or the end of the year using depreciation schedules we get from tax software often from a CPA firm or tax office.
So that would mean if we’re going to use something like that which might look something like this. Then this being this the externals schedules that we’re putting together periodically, every year or as we buy and sell equipment, and alignment and with the help from our CPA firm,
and note that the changes in the equipment are not too many typically in the year, we don’t have a whole lot of things we purchase and dispose of that are really large kind of items. So and all the stuff that’s in the past is already on the schedule.
So we’re really, once we get the system set up, we’re looking at the changes, which isn’t too bad to kind of to kind of adjust as we go. So So then the question is, well, if you’re going to be working with this external report from your tat from your accountant,
you’d probably like to set up your categories of fixed assets that line up with the categories that they’re going to put in place on their tax software, making the adjusting entries as easy as possible. So in other words, you the easiest thing to do would say, I’m just going to make one fixed asset account.
And then I’m going to make one accumulated depreciation account and one depreciation account, and just have all of my fixed assets kind of combined together in that one category.
However, most people break out their property plant into equipment into some standardized categories. And these are the ones you probably want to get from your CPA firm. In other words, how are you going to group the stuff on the sub ledger, if I look at their schedule, and they use furniture and equipment,
and then machinery and equipment for their categorization, which is somewhat standard, then if I go into my assets, and I got furniture, and equipment, instead of furniture and fixtures, it might be a little bit more difficult for me to line up category by category, the items that I have versus the other depreciation schedule.
So what I’d like to do is clean this up, I’m gonna say, I’m gonna make my categories line up to the categories that are on the depreciation schedule. And I then have the question of, Do I want one accumulated depreciation account?
Or do I want an accumulated depreciation account per category, which would allow us to then give the cost per category, and then the accumulated depreciation and the book value per category,
and do I want a depreciation expense account, that is just one depreciation account, or one per category. So those are so what we’re going to do is I’m going to align this to the categories we have here.
And then I’m also going to make another depreciation account to depreciation accounts to line up to the two categories we have here on our schedule, I’m going to adjust my balances to match the balances that are on my sub schedule here.
As you can see, these items happened in 2021. These items are what we’re saying that we purchased in 2020. To the total cost on this schedule is 98,000, for the category of furniture and fixtures,
and note that we’re listing out the actual items here, the sofas, the chairs, the recliners, and so on and so forth, that’s going to be on the sub schedule, which you want your tax preparer to list out properly.
Because if they just put one lump sum of furniture and equipment, and then just some big amount of 98,000, when you sell something in the future, they’re going to run into a problem because you only sold one piece of the thing that’s included in that $98,000 amount. And it’s going to be it’s going to be a pain, to try to figure out how you can record that.
And then the machinery and equipment, we’ve got the two items that we have down here for the 5000. So I want to just tie out to the totals this total, and then this total, and then have the related accumulated depreciation accounts.
Okay, so that’s the goal, I’m going to go back on over and go to the first tab, I’m going to be working in the GL. So I don’t want to do that in the Business View, I want to go to the accounting view to do that. Personally,
I think you that would be the way to go. And then I’m going to switch go into the cog up top and switch it on over to the accounting view. So that the business view when I’m adding and changing accounts, does not drive me crazy, I don’t want to go,
I don’t want to be driven to crazy, the Business View tried to drive me to crazy and I’m getting out of the car, I don’t care if it’s going like 60 miles an hour, whatever. I’ve got my own car,
I’m going to go into the reports, actually, now we’re going to go into the accounting now on the left hand side. And then we’re in the Chart of Accounts closing up the hamburger. And then we’re going to scroll down, we’re looking at the Fixed Assets Area. So the fixed asset, there’s our furniture and equipment.
So let’s first change the name on that to tie out to what the tax software says, which is, which is furniture and fixtures, and then we got this 98,000 in there. Also note that if you talk to your tax professional, they might they of course had to do the depreciation schedule for the tax purposes.
And then they might have to do some different if you want them to have a different schedule for the book. So in this case, I’ve recorded this on the books for straight line method. And if you look at the tax code, the tax code I have down here with using double declining just to see some of the data differences.
But note that the tax code will also have like 179. And bonus depreciation, which has nothing to do with bookkeeping. It’s just that’s just what the tax law whatever they negotiated on the tax love. So it’s has whole whole different kind of reasons as to why you’re depreciate in different ways on the tax code.
So you might want to then have a different depreciation schedule for the books, which makes more sense for bookkeeping, although that’s more work. Or you can just do the tax depreciation and just say,
I’m just going to record my books on a tax basis. Those are some things to discuss with your accounting firm and see it and see what what they think is best. So I’m going to use this one here.
Okay, that let’s do it, then let’s do it. I’m going to adjust this one furniture and equipment, going to hit the drop down and edit it. And let’s just call it, we want this one to be furniture and fixture furniture and fixture not furniture and equipment, furniture and fixture and then save it.
Scrolling back down, it takes me back up, I’m looking for the furniture and equipment. So I’ve got that one. So now I got furniture and fixture. And then if they have one down here for equipment, notice they got this sub account, I don’t really want all this detail. Usually, in my account, QuickBooks is trying, I think what they’re trying to do is trying to guide you to say,
Hey, these are the kinds of things that you might need to basically capitalize, but it gets kind of messy, if you have all this detail on your books, when you know you can have that it’s going to have have to be in these categories for taxes. So so I wouldn’t, I’m gonna not use those tools, machinery and equipment. So this one’s pretty close.
But I would just like to call it machinery and equipment. Again, I think they’re trying to imply in the name, the kind of stuff you should put in there. But what I would like to do is tie it to what is on the depreciation schedules, because that’s what I’m going to have to tie to when I report this to my accountant.
And when I do the, the schedules and record depreciation, so I’m going to edit this one. And let’s just call this one machinery and equipment, machinery and equipment. I think I’m kind of messing up whether I should capitalize the second word or not.
But I’ll keep it at that. And then I’m going to save it and close it. So there’s our two accounts going down. If I go back down, now we’ve got the machinery and equipment and and the other account of the furniture, the furniture and fixtures. So those are the two accounts,
I’m using all these other accounts, I might, I might just like make them inactive or remove them. Let’s go ahead and do that I’ll just make them inactive. Notice that you might even if you’re not going to use them at all, you might try to change the name. So it doesn’t show up in some of the drop down lists when you’re trying to record something because sometimes they still show up in the drop down lists.
So I’m going to say like this one, all of these, all of these, I’m going to get rid of all of this sub accounts, I’m going to make it and it might cause me a problem to make this one inactive, because there’s sub accounts to it.
But I’m going to try to make all these inactive. Let’s just do it. I’m going to say this is going to be inactive. And then yes, and then I got to scroll all the way back down to do it again. So I’m looking at the furniture and equipment, this phone thing, under the long term equipment, I’m going to make that inactive.
Just make some of them inactive. So it’s not just a ridiculous, it’s just ridiculous. Furniture. Let’s make this one inactive. And then scroll down. And then we’re gonna say that we got the furniture. This one where is it? Where did it go? Where did it go?
Custom this one, let’s make that one inactive custom software app. I mean, it’s kind of a specialty. Let’s make that inactive. And then we’re going to go back down. And then this one copiers. Let’s make that inactive. And then let’s go back down, rolling back down.
And then long term. Let’s make this one inactive. And now here’s I’m wondering if they’re going to allow me to make this one inactive because those sub accounts are all inactive. But they still have sub accounts.
So sometimes they get picky with the sub accounts. So let’s go back to the furniture and equipment and we got the land then this one I’m going to try to make this one inactive. Inactive. It’s a you Are you sure yes, it did because I made all the sub accounts inactive. Good. Good. That’s good. Okay, so then I’m going to go down.
So now we got the furniture and equipment, machinery and equipment much easier to find. Now I’m going to make a sub account for each of them. That’s accumulated depreciation accumulated depreciation. So I think we’ve got one right here.
Accumulated depreciation. I want that to tie To the furniture and equipment, now, I’m not going to, I’m not going to do any adjusting entry to match my accumulated depreciation here, here’s the prior period, there’s the seven,
five right there, we’ll do another adjustment in the adjusting entry process to record the depreciation. But for now, I just want to say this one, I want to tie it to the furniture and equipment. So I’m going to edit that. Let’s edit that.
And say, I want to say this is now accumulated depreciation, it’s quite long. So sometimes, and notice it says accumulated deep depletion, I should have recorded depreciation accumulated depreciation, instead of depletion, it’s going to do the same thing. But I’m going to say depreciation, and then I’m going to say that this should be ACC, I’m just going to call it ACC, the PRI.
So I sub us, and then I’m going to, I’m going to make that for now notice, you might want, you could use the full word because I’m going to make it a subcategory of the furniture, and fixture.
But I like to actually put the name that the accumulated depreciation is related to because that makes it a little bit easier to see it. And that makes it really long words. So but I’d like to be able to see it for sure when I when I hit the drop down, and fixture to record something.
So I’m going to say furniture and fixtures. So there we go, there we have it, I’m going to it’s a subcategory, I’m going to save that changing the type of detail, that’s okay, it shouldn’t delete anything I have in it, it’ll just change it to another area. So there it is.
Now I got the furniture and equipment and the ACC D pre. Let’s see what it looks like on the balance sheet. Let’s check it out. See what it looks like run it. In, if I go down to these fixed assets, there’s the furniture and equipment. And now I’ve got this amount under it. Now there’s 3103 Is is not correct.
Now according to my data here, it should be 98 and 5000. So that 5000, I want to break out into its own category. So I’m going to do an adjusting entry to do that. So I’m going to go back to the first tab. And I can do that by going to either the furniture and equipment, I’m going to do it with a journal entry.
Because there’s there’s no, there’s no form that that’s designed specifically to do that. So I’m going to go to either the furniture and equipment or to the machinery and equipment, it might be easier to go to this one, because it’s an increase, sometimes it’s easier to think about the increase. So let’s go into the register here.
This is the register for machinery and equipment, which is going to go up by 5000, I’m going to make a new journal, a new journal. And this is going to happen, let’s say it happens on Oh to say the end of the month Oh 228 to two, so it’s kind of like an adjusting entry.
And this is going to be to adjust the fixed asset balances to match depreciation category counted for is on on the depreciation schedule, on the depreciation schedule or something like that, it’s going to be an increase of 5000. The other side is going to go into furniture, furniture and fixture.
So we’re going to increase this one and decrease the furniture and fixtures. So I’m going to save it and close it. And then if I if I go to my balance sheet and see does it do what what it should do, let’s run it again, running it scrolling down.
And now we’ve got the 98,000 that matches here. 98,000 for the total, I don’t need all this detail, because that’s gonna that’s what I have the sub report for, but I want the categories to match up, and then the 5000 matches up here.
So then I’m gonna have another sub account for the accumulated depreciation, which won’t show up here on this report, because there’s nothing in it, but I want to have it there. So when I do my adjusting entries, I’ll be able to pick that one up.
So I’m going to go back to the first tab, go back to my chart of accounts hold ctrl get back to that one to five sweet spot. And then I’m going to go into now notice we also could have entered that transaction by going into the furniture and fixture register and recorded the decrease on this side.
So I could have recorded the decrease for this one. So let’s go back on up top and then go back to our chart of accounts. And now Now I want to create another sub account ACC deeply for the machinery and equipment. So I’m going to go back up top and say another account.
This is going to be a fixed assets type of account and a accumulated amortization. I don’t know why it does that on the default it should go here on the default I would think accumulated depreciation, and I’m just going to call it abbreviated ACC, D PRI, for and then for the, what I call, equipment, machinery, machinery and,
equipment, he quit mid, and that’s pretty standardized category. So and then I’m going to make it a sub account of machinery and equipment. So if you want to have the full word here, you could just call it accumulated depreciation, but then you’re going to have to accumulated depreciation accounts.
Because you can put it as a sub account, and you’ll see it a difference, because it’ll be the sub account. But I like to see the actual name in the accumulated depreciation account so that it helps me with me when I’d record the transactions. So I’ll save it and close it.
And then I’m going to scroll down. And check that out, check it out. So there we have it. So now we got the furniture and equipment and the ACC D pre, the machinery and equipment and the ACC D pre, there’s no change on the balance sheet from that transaction.
Because there’s nothing in the the accumulated depreciation for the machinery and equipment. So we still sit, we’re still at the same spot at this point. Now the other thing we could make an adjustment to is we can think about the other side of the transaction, which is depreciation expense, which is going to be on the expense side of things.
And we might want to make mult, we can either have one depreciation expense down here, or we could have multiple depreciation expense, they might not have anything for it.
So they might not have anything yet. We’ll add that when we when we actually record the depreciation. But the question is, do I want one depreciation expense, or do I want multiple, you might in that case,
I’m almost I’m generally okay with just having one depreciation expense, and just recording all the depreciation to the one expense, unless there’s some reason that it’s useful for reporting purposes, to break out the multiple different categories of depreciation, because the depreciation expense will simply roll into like all income accounts to the retained earnings.
So unless it’s valuable to me to see the different depreciation expenses broken out, you can put them into one account, it would be easier to do, that’s what we will do here. So if I go then back to the balance sheet, now we’ve got our information here.
And you can see in the fixed assets, we got the triangle, which represents all of the fixed asset type accounts, both accumulated depreciation and the actual fixed asset accounts. And then we’ve got this added subcategory.
And notice that by making this one subordinate to this one, there’s two ways we could have done this, we could have made an overarching account called furniture and fixture and then the cost and the accumulated depreciation being sub subordinate to it. The problem with that is that the because this starts with an A,
and we’re not using account numbers, then the A account would be first, by using the furniture and fixture and as the parents and having this as the sub, then it actually is in the right order, which is kind of nice. And so we’ve got this and then this and then that gives us the subtotal.
And then the machinery and equipment would also have the drop down if we had anything in the sub account which we created, but doesn’t have anything in it. So that’s going to be that’s going to be the detail people often get kind of confused with the fixed asset, how to break out the fixed asset,
how to match it up with your tax preparer, what should you do with the recordings of it so if you get that down, it helps out a lot also, when they convert these ACC accumulated depreciation accounts to like a trial balance or something that throws people off, because it’s a contra asset account so so it’s good to you know,
get an idea of how how are people reporting this people can report it different ways, get it, get a feel for what’s being done, and whatever bookkeeping system you are using, and and just have an understanding of how it works. So we’re not going to go to the trial balance because we haven’t really made any changes other than just breaking out between these two accounts.