2.YE.1.3 Depreciation Journal Entry | Scribe

    2.YE.1.3 Depreciation Journal Entry

    • 0 step
    • QuickBooksQuickBooks
    • AkadianAkadian
    Start in the Sample company.
    To complete this exercise, you must be in the Sample company. From your QBOA account, click on the Gear icon on the top right corner of the screen, then select Sample company.
    Note that you will be logged out of your current account. If you are sure, click "Continue" to confirm.
    A note about depreciation: In accounting terms, depreciation does not affect the resale value of the truck. In other words, it does not mean that the truck is worth $1200 less. Rather, depreciation simply reduces the book value of the truck to reflect the use and wear and tear of the truck over time. Let's get started with the exercise.
    Click the "+New" button, then select "Journal entry".
    This Journal Entry is used to adjust the book value for last year, which will be used on the tax return. For this reason, the date of the Journal Entry will be the last day of last year.
    In the Journal date field, select "December 31 of ***last year***". *Note: your date may be different than what you see below.*
    Let's add a description for this Journal Entry so it's easily understood what this is for. While it would be nice to be more descriptive, characters are limited in the Journal no. field (despite it looking like a gigantic field).
    In the Journal no. field, type "\[Last two digits of last year\] Truck Depreciation". *Note: your year may be different that what is used below.*
    Now let's fill out the Journal Entry. You will need to select the Depreciation account, but as you go through the list, you will see there are ***three*** Depreciation accounts showing. Which one is the correct one? The first is the Depreciation Expense account. This is the "used" amount that will show on the Profit & Loss report and the one we want. The other two Depreciation accounts reduce the value of their corresponding assets. In a real life scenario, naming the expense account differently to distinguish it from these other two accounts would help make things clearer.
    On the first line, in the Account field, select "Depreciation". *This is an Other Expense account.*
    In the Debits field, type "1200".
    Complete the remainder of the Journal Entry, using the Depreciation sub-account of Truck. This will reduce the value of the truck asset.
    On the second line, in the Account field, select "Depreciation". *This is the sub-account of Truck.*
    After selecting the account on the second line, QBO will automatically fill in the balancing amount in the Credits field.
    Click the "down arrow" next to Save and new, then select "Save and close".

    🎥 Video

    Want to follow along? [Click here](https://youtu.be/2YYiWaXD4tU) for our video walk-through.

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