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Tawnya Sutherland

Quickbooks bill paying

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Ok, I'm FINALLY all done putting into Quickbooks all my expenses. I do have a question on one however:

 

I bought a new computer in Jan 2004 for $1400 and obviously this is not an office expense but should be considered an asset correct?

 

How do I post this and set up the depreciation on it for each year to track it? Anyone know depreciation percentages on computers?

 

How do I post this last entry (yes need to be reimbursed on this as well).

 

Thanks for everyone's help!

 

Tawnya

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Tawnya you have a valid concern, that is why I reimburse myself from my "Due to Shareholder" account as it is set up as a balance sheet account. This way it is not considered income it is only reimbursing me for the expense.

 

Hope this is making sense. wink.gif

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I bought a new computer in Jan 2004 for $1400 and obviously this is not an office expense but should be considered an asset correct?

 

Yes it would be a Fixed Asset.

 

How do I post this and set up the depreciation on it for each year to track it?

 

I have my Fixed Asset accounts set up like this:

 

Computer Equipment - Net

Computer Equipment (sub account)

A/D - Computer Equipment (sub account)

 

Anyone know depreciation percentages on computers?

 

According to my May 31/04 year end the Depreciation Rate on Computers is 30%. I'm not sure how to set it up to automatically calculate it as my accountant does a journal entry at the end of the year for this.

 

HTH flowers.gif

 

 

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I agree with Jennifer's last post in regards to answers to your questions.

 

In regards to depreciation, there are two methods of depreciation that you can use: 1) Straight-Line or 2) Declining Balance.

 

When using Straight-Line, you first calculate the estimated life of the computer (say, 3 years). You then divide the purchase price by 3 and you depreciate the computer an equal amount each year. This is the easiest method to use.

 

When using Declining-Balance, (which is what Jennifer's accountant calculates), a different rate is used depending on the useful life of the asset (sorry, I don't know the current rates). The calculation, when performed annually is based on the net asset value at that time.

 

Perhaps you might consider using the Straight-Line method. It is much easier to calculate, and you can set up a "reminder" in QB to remind you to process the transaction when the time is due.

 

Just a thought,

 

Lori

smile.gif

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Perhaps you might consider using the Straight-Line method. It is much easier to calculate, and you can set up a "reminder" in QB to remind you to process the transaction when the time is due.

 

I have never done this, but I think this is great idea Lori. Thanks, I might try this myself.

 

flowers.gif

 

 

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One concern with the way you do it Pam is if you write a cheque from your Owner's Draw for direct expenses is that you will have to claim this as income whereas it was actually an expense.

 

When I take a salary, yes it comes from Owner's Draw, but when I am being reimbursed, it does not as stated above else I will have to pay income tax on these expenses.

 

Tawnya

Just FYI/another viewpoint on this...

 

You only use Owner's Draw if you are a sole prop or a general partnership. When you calculate your income, it comes from your sales/service/income accounts, NOT your equity accounts. If you look at the way the P&L Statement is calculated, it takes your INCOME less your EXPENSES and gives you your profit. Your PROFIT (less other expenses that may not show up on your P&L) is what you pay taxes on at the end of the year, NOT your draws.

 

So it doesn't actually matter if you take it as a "draw" or as a "loan". It really depends on if you intend to reimburse yourself or not. I usually don't because I see it as an investment. When I buy that new hard drive with my personal funds, I book it as an investment. When I take money out at the end of the month, it's a draw.

 

Because you and your business are one in the same, it's all semantics, really.

 

Just make sure those expenses and income are correct, that is what your CPA will use at the end of the year.

 

Sorry, I've been doing bookkeeping for over 12 years and worked with CPAs for 10, so I'm a stickler about WHAT you pay taxes on.

 

NOW, if you were incorporated, it would all be calculated different. I also see you write "cheque" which means you might be from Canada, eh? wink.gif I think accounting varies slightly up there, although I'm not sure.

 

As for depreciation, your book depreciation is going to vary from what your CPA does at the end of the year for tax purposes. 3 years is a good standard for an office computer, I would put a salvage value on it though. If it's worth $1400, I'd say $200 salvage, so that's $1200 over 3 years or $400 per year. JMO, remember you want your books to show assets and growth in case you ever need to show them to someone (you never know!), but you want your tax return to show as many expenses as you can get away with, but that's your CPA's job wink.gif Remember to take the purchase date into account when depreciating it on the books! smile.gif

 

Okay, I'll shut up now, bookkeeping is my forte, it's 98% of my VA biz wink.gif

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Hi Candy,

 

Yes my fiance' is a sole-proprietor and it doesnt really matter either way his personal income or the business income because it is all in a sense the same...

He pays for everything from the business account and then when he pays for things which would be considered "personal" or non-business or takes money from the account this is all entered as a draw. I really like Quick Books and have learned alot from it!

 

Pam

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