Your company's vehicles and equipment normally lose value each year. Part of the lost value of vehicles and equipment can be allocated as an expense to your company each year that you benefit from their use. The allocation of the lost value of a piece of equipment over its useful life is called depreciation. While AccountEdge doesn't calculate depreciation automatically, you can quickly record your equipment depreciation using a General Journal entry.
Example
For example, you might have two accounts: Company Van, numbered 1-4200; and Computer Equipment, numbered 1-4300. To track depreciation, you would create two new asset accounts: one called Company Van-Accumulated Depreciation, numbered 1-4201; and another called Computer Equipment-Accumulated Depreciation, numbered 1-4301. You would also create an expense account called Depreciation Expense. The asset accounts will always have negative balances to show reductions in the value of the depreciable assets.
Depreciation methods
There are several methods of depreciation. You should determine which method to use to lessen your company's tax liability. Consult your accountant to see whether you should be depreciating vehicles and equipment and, if you should, which method is best for you. Depreciation must be reported periodically. Many businesses depreciate assets monthly or quarterly; consult your accountant for advice about timing depreciation transactions for your company.
Since you must report depreciation on a periodic basis, you may want to create a recurring transaction for this purpose.
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