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Fixed Assets in QuickBooks - Which Accounts To Use - YouTube
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- [Voiceover] Let's look
at a transaction in which
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a fixed asset was purchased.
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I'm gonna go to Enter Bills
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because the asset was
purchased on account.
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I'm gonna go back and
find where we purchased
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the computers on account.
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Now in buying a fixed
asset, use the Expenses tab,
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not the Items tab.
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The Expenses tab allows
you to choose any account,
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not just expenses.
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The tab shows the Expenses label
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because expenses are the most
frequently chosen accounts
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for this window.
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When recording the
purchase of a fixed asset
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such as a computer, use the
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Computers, Cost account.
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Do not use the Computers account.
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The Computers, Cost
account is a subaccount
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of the Computers account.
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The Expenses tab will first
show the parent account
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and then the subaccount.
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If we open up the Chart of Accounts,
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we see that there are three
accounts for computers.
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The Computers account
is the parent account.
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It exists just to keep these two accounts,
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Computers, Cost
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and Accumulated Depreciation, Computers
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side by side on the Chart of Accounts.
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We never assign anything directly
to the Computers account.
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We also have the Computers, Cost account.
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When purchasing a computer,
choose this account.
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Now if you accidentally
chose the Computers account
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instead of Computers, Cost,
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just go back to the transaction
and change it from Computers
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to Computers, Cost.
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And, of course, we also have the
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Accumulated Depreciation,
Computers account.
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Obviously choose this
account when recording
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accumulated depreciation
for the computers.
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Notice that the Computers, Cost account
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and the Accumulated Depreciation accounts
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are indented.
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This is because these
accounts are subaccounts
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of the Computers account.
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Again, this Computers
parent account only exists
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to keep these two accounts side by side
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on the Chart of Accounts.
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If you edit
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either the Computers, Cost account
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or Accumulated Depreciation account,
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you'll notice that they
are both subaccounts
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of the Computers account.
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This is where we choose
the parent account.
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If we turned off the
subaccount and saved it,
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notice that Computers,
Cost no longer falls
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directly under Computers
and it's no longer indented.
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Also notice that the Accumulated
Depreciation, Computers
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account is listed as a Type,
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this is the account type,
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of Fixed Asset.
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In Intro to Accounting we learned that
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Accumulated Depreciation
is actually a Contra Asset
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and not a Fixed Asset.
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But when creating a new
account in QuickBooks,
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notice there is no type of account
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called Contra Asset.
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It's not listed here either.
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So when creating an Accumulated
Depreciation account,
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we're forced to use the
Fixed Asset type of account,
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and then later, when we record
Accumulated Depreciation
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in it, we credit Accumulated Depreciation,
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like we always do, but
by crediting something
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that is a Fixed Asset, you're
giving it a negative balance.
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The end effect of the
negative balance in the
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Accumulated Depreciation
is it starts to offset
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the overall value of the
Computer account as time goes by.
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So the $3,600 cost of the computer,
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minus the Accumulated Depreciation
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gives you the assets book value, $3,540.
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