If you’re adopting a “Periodic Inventory” basis, do not select “Inventory as Detail Type” in the Chart of Accounts. Instead, use Other Current Assets for Detail Type and for the Category Type, Purchases as the account name. For the Detail Type, you never want to use “Inventory Asset”, this happens to be default account name designated for Perpetual Inventory tracking in QBO. If you want to switch later, it creates problems.
Case: Amortizable asset being paid off with Notes Payable
I have an asset that needs to be amortized (a liquor license) and I’m confused about how to keep track of the payments we make on it in Quickbooks. The full price is $50K, we put $5K down, and make $750 payments each month (no interest) until it is paid off.
I’m not sure how to list this asset in Quickbooks, I know it’s supposed to be amortized straight-line over 15 years (Reg. 1.197-2(b)(8).
You will need to set up ” Liquor License” as Intangible Assets (Or Other Assets in QBO), not as Fixed Assets.
Here is how to do it in new QuickBooks Online (QBO):
To setup new accounts in Chart of Accounts:
From the home page screen > Company Gear icon (upper right corner) > Settings > Chart of Accounts > New (blue button)
- #1 Category Type = Other Assets > Detail Type = Licenses > Name and Description = Liquor License
- #2 Category Type = Other Assets > Detail Type = Licenses > Name and Description = Cost > Check Sub Account checkbox = Liquor License
- #3 Category Type = Other Assets > Detail Type = Accumulated Amortization of Other Assets > Name and Description = Accumulated Amortization of Liquor License > Check Sub Account checkbox = Liquor License
- #4 Category Type = Expenses > Detail Type = Other Misc. Costs > Name and Description = Liquor License Amortization Expense
- #5 Category Type = Long Term Liabilities > Detail Type = Notes Payable > Name and Description = Notes Payable to XYZ
How to record $5K down payment and also record $50K Liquor License as Other Assets and $45K as Notes Payable at the same time?
How was this $5K down payment made?
- For Check = use Check form (Create + sign > Vendors “Check”)
- For Online, Debit Card type = use Expense form (Create + sign > Vendors “Expense”)
You enter $5K down payment transactions as other use payment with the following Account splits under Account details heading:
- Notes Payable to XYZ (refer to #5 above) = $5,000
- Notes Payable to XYZ (refer to #5 above) = -$50,000 (negative amount)
- Liquor License (Other Assets type, refer to #2 above) = $50,000
You will notice Check Amount is still $5,000.
For amortization of liquor license, you can setup monthly journal entry and make it recurring transactions type.
- Debit > Liquor License Amortization Expense (refer to #4) = $277.78
- Credit > Accumulated Amortization of Liquor License (refer to #3) = $277.78
When making $750 monthly payment, select Notes Payable to XYZ account (refer to #5 above).
Even after it’s fully amortized, cost and amortization should stay on the books until it’s sold again.
It is a known issue at this time. There is no way to reorder it like in desktop version. Only way is to show cost first and then depreciation is to assign account number.
See attached screen photo for reference.
If you feel this feature need to be added in future revision, please add your voice here. We’ve already done it in the past.