Simple/Smart Fixed Asset Handling in QuickBooks - Part 2

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This article is the 2nd part in a series which introduces a new method for handling fixed assets in QuickBooks desktop editions. For details on implementing it, refer to the author's textbook, Simple/Smart Fixed Asset Handling in QuickBooks, by Mark Wilsdorf. 

For Part One of this series, click here.

Inventory Part Items for Fixed Assets

In the Simple/Smart (S/S) method, every fixed asset is represented by a main Item and either two or three subitems. Here is a fragment of the QuickBooks Item List showing a set of Items for a pickup truck:

An asset's main Item may—and should!—be a subitem of other Items, as shown above. In this example, Dodge pickup ___ is a subitem of Ma, which in turn is a subitem of Fx.

Fx is the master parent Item for all fixed assets—the top-level parent of all Items which represent fixed assets. (Having a master parent Item is essential for fixed asset reporting.) Ma represents Machinery & Vehicles, a fixed asset category separate from others, such as Buildings or Land. Separating Items into categories by using subitems of the master parent Item causes related assets to be grouped together on reports.

The Asset's Main Item

An asset's main Item identifies the asset but should never be used directly in transactions—only its subitems (Basis, Accum Depr, Depr Recapture) are to be used in transactions. (This should make more sense when you see the transaction examples in Part 3.) For this reason, main Items like Dodge pickup ___ should have all of their account fields pointing to an error indicator account—an Other Income account used solely for the purpose of flagging errors:

How does the error indicator account work? If the Dodge pickup ___ Item is ever used directly in a transaction (without a subitem), an amount will be posted to the Error if Nonzero account and will show up in the Other Income section of profit and loss reports. Drilling down (double-clicking) on the Error if Nonzero amount in a report will reveal the transaction(s) where the Dodge pickup ___ Item was used without a subitem.

Asset Subitems:  Basis, Accum Depr, Depr Recapture

The main Item's subitems are the real workhorses of the S/S method. Every main asset Item should be set up with subitems named Basis and Accum Depr. A third subitem, Depr Recapture, is only needed if the asset is sold outright and not traded in. Each is set up in a unique way, different from each other. Here are examples:

We don't have space here to discuss the "what's and why's" of the accounts assigned to these subitems. Just know that they cause QuickBooks to post financial amounts in the right places for properly tracking fixed asset basis, accumulated depreciation, gain/loss on fixed asset sales, etc.

Automating Item Creation

The S/S method requires setting up a lot of Items. Setting them up one at a time could be a big, tedious chore, but you can automate the job by creating a batch of unused Items in a spreadsheet—any number of them—and importing them into QuickBooks. You can find detailed steps for doing this in Simple/Smart Fixed Asset Handling in QuickBooks, but the basic steps are:

Create a "dummy" set of fixed asset Items in QuickBooks—a main Item plus Basis, Accum Depr, and Depr Recapture subitems.

  1. Export the entire QuickBooks Item List to a spreadsheet.
  2. Delete all other Items from the spreadsheet except the four "dummy" fixed asset Items.
  3. In the spreadsheet, make multiple copies of the "dummy" Item sets, editing the main Item name in each set to make them slightly different (UNUSED2, UNUSED3, etc.).
  4. Copy the Items from the spreadsheet to the Windows clipboard, then Paste them into the Add/Edit Multiple List Entries window in QuickBooks, to create a batch of new, unused Items for representing fixed assets.

After this, when you acquire a new asset, you won't have to set up Items for it. Instead, you can simply edit the Item name of the main Item in one of the unused Item sets—changing "UNUSED2" to "JCB Backhoe ___", for example. (The underscores are a reminder to add the tax preparer's asset number later, after he or she has assigned one, for clear communication about this asset in future reports for income tax preparation.)

Coming in Part 3...

Next time we will see how to use these specially-set-up Inventory Part Items for entering fixed asset purchases and sales.

About the Author

Mark Wilsdorf has worked with QuickBooks users in agriculture since the 1980s. He was editor of AgriComp, the first national magazine for agricultural computing, has authored books about using QuickBooks in agriculture (The QuickBooks Farm Accounting Cookbook™ series), has done consulting work for Fortune-500 businesses serving agriculture, and has been the lead developer on several software projects for developing QuickBooks add-ons. He currently writes an agriculture-oriented QuickBooks blog at QBAgCenter.com.

For proof that Mark always has at least one foot in agriculture, you might look around his office at home.... there you would find things like a folder of soil test reports, calf obstetrical supplies, a seed sample waiting on a germination test, a stack of machinery parts catalogs... and a lariat that he will never learn to use really well.

But, beyond agriculture, Mark is just a 'really smart guy,' as this new series is certain to prove to those of you who have not read as much of his stuff as I have. Over the next several weeks as we continue his installments in this new series, you should get quite a few ideas about his treatment of 'fixed assets' in ways you may have never given them thought before.