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  #1  
Old 06-27-2008, 04:13 PM
Rick Parrow Rick Parrow is offline
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Red face Computer Parts - Fixed Asset or Expense?

I built a brand new PC from parts that were all ordered brand new (motherboard, CPU, memory, case, hard disk, etc.). Separate purchase orders (and invoices), different vendors (that is, no single invoice for the entire thing).

How do I enter these into QuickBooks?
  • Office & Computer Supplies (Expense account)? or
  • Computers & Office Equipment (Fixed Asset)?

Please remember that I am interested to know the right answer mainly in terms of tax (IRS) considerations. Must this be listed property?

Thank you!
Rick
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  #2  
Old 06-27-2008, 04:47 PM
Joe Williams Joe Williams is offline
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Since you purchased the items seperatly, expense then to "Office & Computer Supplies" or "Computer Parts".
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  #3  
Old 06-27-2008, 05:03 PM
suzannemead suzannemead is offline
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Although I agree with Joe (and would most likely do the same thing) I believe the IRS will want the total cost of parts labor (if any) listed and depreciated the same as if you had purchased an off-the-shelf computer.
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  #4  
Old 07-15-2008, 12:54 PM
Rick Parrow Rick Parrow is offline
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Question

Quote:
Originally Posted by suzannemead View Post
Although I agree with Joe (and would most likely do the same thing) I believe the IRS will want the total cost of parts labor (if any) listed and depreciated the same as if you had purchased an off-the-shelf computer.
That makes sense, thank you both for your replies.

Now how do I resolve this discrepancy (between proper accounting classification and IRS requirement) in QuickBooks?
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  #5  
Old 07-15-2008, 01:01 PM
suzannemead suzannemead is offline
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Post the entire cost of the computer to a Fixed Asset account. If you have already posted them to an Expense account, make a journal entry for the total from the expense account to the fixed asset account. Date placed in service is the applicable date - not when each part was purchased.
It may be possible for you to take the entire cost of the computer as a Section 179 expense on your taxes, but the computer should still be shown as a fixed asset.
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  #6  
Old 07-15-2008, 01:10 PM
Rick Parrow Rick Parrow is offline
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Question

Quote:
Originally Posted by suzannemead View Post
Post the entire cost of the computer to a Fixed Asset account. If you have already posted them to an Expense account, make a journal entry for the total from the expense account to the fixed asset account. Date placed in service is the applicable date - not when each part was purchased.
It may be possible for you to take the entire cost of the computer as a Section 179 expense on your taxes, but the computer should still be shown as a fixed asset.
Yes, I can and I am planning to take the entire cost of the computer as a Section 179 expense.

I haven't entered those expenses yet to QuickBooks, so I am glad I still have some flexibility here. Would you advise to enter each purchase directly to the Fixed Asset account?

Or would you still advise to post these purchases to an expense account, then make a journal entry for the total from the expense account to the fixed asset account?

Thanks,
Rick

Last edited by Rick Parrow; 07-15-2008 at 01:14 PM.
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  #7  
Old 07-15-2008, 01:29 PM
suzannemead suzannemead is offline
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You can do it either way, but I prefer to have only the total in the Fixed Asset account. It's cleaner.
Even if you take the Sec. 179 deduction leave the computer cost in that account. Since tax depreciation and book depreciation don't have to match you may want to use regular depreciation on the books instead of expensing it. You need to leave the computer in the account also in case you sell it and you may need it to include on your personal property tax return.
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  #8  
Old 07-15-2008, 01:46 PM
Rick Parrow Rick Parrow is offline
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Thank you very much! Your instructions are very clear to me now (I am familiar with using regular depreciation on the books instead of expensing it, while taking Sec. 179 deduction).

Here is what I am going to do shortly:
  1. Enter each purchase as an expense (good for reconciling my credit card since all purchase were done using credit card).
  2. Post the entire cost of the computer to the existing Fixed Asset account (Fixed Asset Item List > Item > New)
  3. Create a General Journal Entry for each year's depreciation.

Does that sound right?

Thanks,
Rick
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  #9  
Old 07-15-2008, 02:03 PM
suzannemead suzannemead is offline
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You should have 2 Fixed Asset accounts. Actually I use 3. One is the Asset Name (parent account). One is a subaccount for the Asset Cost. One is the Accumulated Depreciation as a sub account. That may be overkill but is shows you the cost, the accumulated depreciation, and the parent account shows the difference between the two. You can get away with just a cost account and an accum. depreciation account. It's a matter of preference.
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  #10  
Old 07-15-2008, 02:19 PM
Rick Parrow Rick Parrow is offline
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Quote:
Originally Posted by suzannemead View Post
You should have 2 Fixed Asset accounts. Actually I use 3.
I do! I also use three Fixed Asset accounts:
Code:
1. Computers & Office Equipment
    1.1 Accumulated Dpreciation
    1.2 Cost
I didn't invent this - I actually learned it all from you.

Again, thank you very much!
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  #11  
Old 07-15-2008, 03:14 PM
suzannemead suzannemead is offline
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Thank you so much.
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  #12  
Old 03-30-2009, 05:31 PM
Rick Parrow Rick Parrow is offline
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Question

OK - tax time is here and despite the fact that I did everything correctly according to suzannemead's great advice, now when I import to TurboTax, this amount lands in the "Misc. Expenses" line in TurboTax, instead of Landing in "Assets".

OK - I know that I don't import the "Depreciation Expense" account - on purpose.

But how do I make TurboTax not import that amount as Misc. Expenses?

I mean, I can fix/override this manually but the thought of having to remember to do this every year (for new such purchases) is daunting...

Is there a trick to this?

Thanks,
Rick
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  #13  
Old 03-30-2009, 06:10 PM
Rick Parrow Rick Parrow is offline
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Never mind - I found the culprit and solved it:

When I posted the entire cost of the computer to the existing Fixed Asset account (Fixed Asset Item List > Item > New), I forgot to add a parallel journal entry under Computers & Office Equipment:Cost, assigning it to account Office and Computer Supplies (expense).

Doing this, deducts the total cost of the parts (computer, listed property) automatically from the expense account, and when imported to TurboTax, all I have to do is enter that cost in the listed property section, not having to subtract it from the Misc. Expenses line.

All is well now.
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  #14  
Old 03-31-2009, 05:06 AM
Lisa1111 Lisa1111 is offline
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hi

Although I agree with Joe (and would most likely do the same thing) I believe the IRS will want the total cost of parts labor (if any) listed and depreciated the same as if you had purchased an off-the-shelf computer.
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