You can use a General Journal transaction to capture the depreciation of an asset. There are different ways of depreciating assets. Your accountant will have your specific schedule for your business or investments. Many property investors also get Quantity Surveyor reports for this area.
- Set up an Asset account for the depreciation of each Asset type. For example, an Asset: Air Con would have a depreciation account called Asset: Air Con Accum Deprec. To ensure your account names aren’t too long, we have abbreviated Accumulated Depreciation to Accum Deprec.
- Set up an Expense account for booking depreciation expense (eg Expense: Depreciation).
- Add the following General Journal transaction:
Account Tax Code Debit Credit Asset: Air Con Accum Deprec –No Tax Code– 100.00 Expense: Depreciation –No Tax Code– 100.00
NOTE: The amounts entered don’t include any tax.
This transaction has offset your Asset: Air Con category by the depreciated amount. It also has the effect of booking the expense to your Profit and Loss.
Asset:Air Con + Asset:Air Con Accum Deprec = Residual Air Con Asset Value
NOTE: The Asset:Air Con Accum Deprec above will be a negative number in the Balance Sheet. Crediting an Asset account creates a negative amount in accounting systems (reduces it’s balance).
Depreciation journals are normally done at the end of your reporting period. For some businesses this is monthly, for others yearly.
TIP: If you have lots of assets you can put them all in a single journal. Then, next year you simply use the Duplicate button on the journal to make a copy, edit each line, and save it for the new year. You might also add in new assets at this time. Sometimes you can run a journal for each depreciation method or group of common assets to break this up a little. This is useful if you have lots of assets to manage.