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taha1989
Level 2

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

Hey everyone,
Thank you all for taking the time out to view this and possibly help me out with a solution. I started at my company during May of 2018. We have bought a bunch of computers throughout the year but it looks like no one depreciated any of the computer equipment throughout the year. As we are working on our year end, my boss has basically said to take care of that and look into it. I'm no whiz and I don't want to look stupid or dumb in front of my boss so I was hoping I could get some help here from the community. I have receipts of every purchase made during the year for computer equipment, and obviously they are booked on the balance sheet whenever they were purchased, just never depreciated. I googled that the useful life of computer equipment is 5 years, is that right? We also purchased monitors and other equipment but for the sake of this topic, lets assume it was only computers. How should I go about tackling taking care of a whole years worth of depreciation expense for computer equipment ? I'm a little lost and don't really know where to start. Any kind of advice or suggestion would be extremely beneficial. Should I list out when each asset by purchase price and date, then somehow apply the straight line method to it over 5 years, and make some kind of entry on 12/31? and repeat for every single computer we purchased? Obviously I'd make the entry for the cumulative sum and not one entry for each purchase, right?
Thank you guys so much again for your help, and I apologize if I sound ignorant about any thing I mentioned above! Please feel free to correct me as it's only going to help me learn.
Have a wonderful day.

8 Comments 8
Pete_Mc
Community Champion

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

Call your Accountant....

 

Depreciation is generally entered in at the end of the year.  But it's not just a number you toss in because you want to or your boss said to put in. 

 

Depreciation is part of your tax return, so it is a number you get from your Accountant.  They may choose to depreciate your equipment on a schedule over a number of years or (if they can) they may depreciate it all in 2018.  And in addition to depreciation, there are probably going to be a number of other Year End entries you're Accountant will either make in your QBs for you or will give you a list for you to put in. 

 

Since you're using QBO, you have the option to give your Accountant a login so they can make the Year End adjustments themselves.  This assumes the boss wants them to have access.  (Pretty common, but not something I'd assume..)

taha1989
Level 2

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

So i know for IRS purposes, in the past on tax returns I've seen them use double declining method, but I believe they want to use straight line for internal purposes. Should I just start a depreciation schedule and start listing assets and when they were bought and applying straight line to them all the way through 12/31?

Pete_Mc
Community Champion

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

I wish I had an answer for you, but it's REALLY a question for your Accountant.  And I don't know that you should take anyone's advice here since none of us really know what's happened in the past or what your financials are now.

 

It's also very likely that your Accountant already has a Depreciation Schedule which they want to follow.  Not that it can't be changed if you tell them you want to write things off faster.  But depending upon what kind of year you've had, they may (or may not) advise against making a change.

 

Bottom line is that it's really not a QBs issue it's a Tax/Accountant issue.  You can write the stuff off any way you want and put whatever numbers you want into QBs.  But if you want your reports to to actually match what you're filing, you need to talk spend 15 minutes on the phone with your Accountant to find out what they're going to do.

 

And if you're doing your taxes internally then all bets are off.  Follow managements directions and hope it's all within code.  (Wouldn't hurt to have an email of them telling you what they want done, just in case they're wrong.)  Looking at the old Tax Returns  will also give you some guidance as to the process in the past.

JanJaw
Level 3

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

Thank you for posting this detailed question!  I began my job one month earlier that you.  I inherited an incomplete set of books from 2017 to set up 2018.  I have the same question, and have just requested support from our accountant to tell me exactly  what entries to make. 

taha1989
Level 2

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

Thank you! If you can let me know what kind of advice they give you that would be great!

qbteachmt
Level 15

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

You don't have to Depreciate Monthly. People do that for purposes of seeing monthly financial reporting in larger business. Most smaller businesses just make the one year end entry.

 

Next, the US tax regulations changed what that even means. Per TCJA Dec 2017, have you reviewed if your purchases are even considered New Fixed Assets at all? That is why you work with your own CPA = the tax regulations are constantly changing and you follow what applies to your operations, your entity type, and what is in place for the tax regulations for the "year placed in service." Example: I bought a $2,000 computer and that is Equipment Expense. No Depreciation required.

taha1989
Level 2

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

Hey did you ever figure this out?

Pete_Mc
Community Champion

Didn't depreciate computer equipment all year -- how to tackle depreciating for year end and moving forward?

@qbteachmt  post above pretty much summed it up.

 

Check with your Accountant to see what the best plan is for your situation and what implications your State Taxes may have on depreciation. 

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