How to Set Up, Record & Calculate Depreciation in QuickBooks/QBDT/QBO?

Depreciation is a method of accounting that is used for assigning an actual cost to the assets. The assets can either be physical or tangible and the cost is assigned over the time period it would be useful. This method mentions how much reduction has been made in the value of the asset. Accumulated Depreciation can be slightly different from this method. As its name suggests, it states the depreciation of an asset that is cumulative upto a certain time.

To do the accounting for QuickBooks depreciation, a user needs to set up an account. A common tab that you will find in most of the QuickBooks versions is the Chart of Accounts. This tab is useful for all account-related processes. By utilizing it, you can set up your depreciation account as well. After you have set it up, you may head to recording the depreciation. With the recording/entering being complete, you can calculate it.

What Type of Account is Depreciation in QuickBooks?

The QuickBooks depreciation account falls under the fixed asset category. Fixed assets are those that are purchased for a long term. They can be used till the time you want to use them. The value of an asset can decrease over the time period due its usage or other instances. To measure its monetary value after it has been used, this category can be helpful.

Accumulated depreciation can be categorized as a contra account type. A contra account is created in the general ledger for reducing the related account’s value. It lowers the fixed asset items cost on the balance sheet. 

How to Set Up a Depreciation Account in QuickBooks?

You can find a list of accounts in the QuickBooks software. This list is called the Chart of Accounts or COA. It can be used to set up depreciation in QuickBooks. For a new account and a fixed asset account in the software, COA can be used. Using the same option, you can execute the manual setup in QuickBooks Online.

Method 1: For Setting Up in New Account

QuickBooks Depreciation can be set by users via the Chart of Accounts button. This option can be found after tapping on the Gear sign present on the homepage of QuickBooks. Then you need to click on the New button. The Depreciation tab is to be selected and the Next option should be pressed. 

Here’s how to depreciate in QuickBooks via COA:

• Run the “QuickBooks” software.
• Click on the “Gear” icon. It will show the settings.
• Then press “Chart of Accounts”.
• Select “New” in the fourth step.
• Tap on “Depreciation”.
• Now, select the “Next” option.
• A dialog box will pop up. Enter the name of the depreciation account in this step.
• Push the “Finish” button in this instruction.

Once you press the button, a new depreciation account will be set up in your QuickBooks application.

Method 2: Setting up Depreciation of Fixed Assets in QuickBooks 

The assets that are fixed can be depreciated in QuickBooks. Before depreciating them, you need to set up an account for the fixed assets. The Gear option on the QuickBooks window is to be chosen. Then press the Chart of Accounts or COA tab. From here, move to New and look for the Account Type pull-down. In this menu, opt for the Other Expense option.

Finish the steps and understand how to depreciate fixed assets in QuickBooks:

• The “Gear” sign is to be clicked in the accounting software.
• Then hit the “Chart of Accounts” option.
• Tap on “New”.
• From the drop-down menu of “Account Type”, pick “Other Expense”.
• In the pull-down of “Detail Type”, go for “Depreciation”.
• Next, mention the name of the account.
• Move to “Save and Close”.

Give this method some time so that the fixed assets are set up in the software. On ensuring that the setup is complete, you may start using the account for recording QuickBooks depreciation.

Method 3: Set up in QuickBooks Online Manually 

For setting any preferences or customizations, you can manually set up an account for depreciation in QBO. You need to go to the Settings button of the software and then click on the Chart of Accounts button. The New option is to be pressed. Now, pick the Other Expense tab from the available drop-down of Account Type. Among the options in the Detail Type pull-down, you will have to select the Depreciation feature. 

How to set up depreciation in QuickBooks Online can be known with these instructions:

• Launch the “QBO’ software.
• Click on “Settings”. Or, you may press the “Gear” like button.
• Next, pick the “Chart of Accounts” tab.
• Hit the “New” button.
• View the drop-down of “Account Type”. 
• Choose “the Other Expense” option.
• From the drop-down of “Detail Type”, opt for “Depreciation”.
• After that, provide a name for the account such as “Asset Depreciation”.
• Press the “Save and Close” option.

After this button is pushed, the setup of assets in the software will be complete within some time. In the manual process, you may make any customizations as required. Later, you may proceed to enter, post, or track depreciation in QuickBooks Online.

How Do I Record Depreciation in QuickBooks?

Once the depreciation account is set up in the QuickBooks software, you may want to start recording the aspects in it. To do so, the Lists button is to be clicked. If you are working in the QBDT software on Mac, then you are supposed to find and click on the Chart of Accounts feature. Apart from this, QBO allows its users to enter/record the depreciation through the Journal Entry tab. 

If you want to learn the various methods for how to record depreciation expense in QuickBooks or other such aspects in the versions, then keep scrolling below.

Method 1: Using Lists in QuickBooks 

Recording QuickBooks depreciation requires the usage of the Lists tab. This option can be found in the main window of the software. After clicking it, tap on the Chart of Accounts menu. Then the sub-account that is used for tracking the accumulated depreciation is to be clicked twice for entering depreciation in QuickBooks. Further, the amount of depreciation has to be entered.

• Login to your “QuickBooks” account.
• Go to the “Lists” menu.
• Then press the “Chart of Accounts” option.
• Click twice on the sub-account that helps in tracking the accumulated depreciation of the asset that is to be depreciated.
• Mention the amount of the depreciation for creating a transaction.
• Here, tap on “Account”.
• Fill in the expense account that is used for tracking the depreciation.
• Hit “Save” to finish the process.

Method 2: Via Lists in QuickBooks Desktop for Mac

The Mac users of QBDT can enjoy the benefits of recording the depreciation in their application through the Chart of Accounts option. To reach this tab, you are required to press the Lists button. Once you find the COA button, click on it. Then pick the sub-account that you use for tracking the accumulated depreciation. Move to the Action drop-down and hit Use Register.

To receive further guidance on how to record depreciation in QuickBooks Desktop for Mac, the below method is to be processed:

• Open the “QBDT for Mac” window.
• Click on “Lists”.
• Then head to “Chart of Accounts”.
• The sub-account that is used for tracking the accumulated depreciation is to be chosen.
• From the drop-down menu of “Action”, tap on “Use Register”.
• The depreciation amount is to be entered in the register as a decrease.
• Now, go to the field of “Account”.
• Fill up the expense account for setting up the account that will be used for tracking the depreciation. 

Method 3: Recording in QuickBooks Online Manually

Users are offered to record the assets for depreciation in QBO through the manual process by making use of the Journal Entry option. After pressing on the +New button, you will find this tab. You will have to tap on it and move to the first line of the drop-down of Account. From here, opt for the asset account via which the loan is tracked. 

These instructions will describe how to depreciate assets in QuickBooks:

• Head to the accounting software.
• Tap on “+New”.
• Press “Journal Entry”
• In the first line of the “Account” pull-down, choose the asset account that is used for tracking the loan.
• Fill up the depreciated amount in the column of “Credits”.
• Now, move to the second line, and in the drop-down of “Account” opt for the QuickBooks depreciation account that was created by you.
• In the column of Debits, type the matching depreciated amount.
• Afterward, click on “Save”.

Note: Assets cannot be recorded automatically for depreciation in QBO.

How to Record Accumulated Depreciation in QuickBooks Desktop?

When you have to find the net book value of an asset, you need to focus on its accumulated depreciation. For this, its account setup becomes vital. The method to set it up can be commenced by creating a new fixed asset account for every asset that you are going to depreciate. Also, adding up two sub-accounts for each of the fixed asset accounts that you have created is necessary. 

Learn how to enter accumulated depreciation in QuickBooks Desktop by performing the procedure mentioned below:

• A new fixed asset account is to be created in “QuickBooks”. 
• Make the account for each of the assets that are to be depreciated.
• Two sub-accounts are also to be added. 
• Make sure that you add the sub-accounts for every fixed asset account that you make. 
• Now, an expense account has to be made. 
• You may name the account as “Depreciation Expense”. It is to be created for tracking the depreciation expense.

How Can QuickBooks Calculate Depreciation? 

Users can calculate depreciation in the Intuit accounting software for finding out the actual value of the assets. For calculating it, you need to provide all the details of the fixed assets. Then choose among the Straight-Line, Sum of the Years’ Digits, and Double Declining Balance methods, as per your preferences. 

Complete this procedure to know how to calculate depreciation in QuickBooks:

• Mention the details about the fixed assets in “QuickBooks”.
• Through the “Straight-Line”, “Sum of the Years’ Digits” and “Double Declining Balance” methods, the depreciation expense can be automatically calculated by the software.
• Next, opt for the method based on your requirements.
• The details of each of the assets are to be saved in the end.

The calculated QuickBooks depreciation will get saved in your account which can be used later for reference for recording the expense related to it.

On the Whole

QuickBooks depreciation can be set up by the users via various ways. This blog taught you the steps for setting up these ways. Entering depreciation can be important for several reasons related to accounting. The methods to enter were shared as well. You can finally calculate it and complete your company’s accounting operations.