Your company's vehicles and equipment deteriorate and lose value each year. Part of the cost of vehicles and equipment can be allocated as an expense to your company each year you benefit from its use. The allocation of the cost of a piece of equipment over its useful life is called depreciation. While AccountEdge doesn't calculate depreciation automatically, you can quickly record your depreciation figures using a General Journal entry.
If, for example, you have two accounts, Company Van, numbered 1-4200, and Computer Equipment, numbered 1-4300. You'll 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'll also create an expense account called Depreciation Expense. The asset accounts will always have a negative balance to show a reduction in the value of the depreciable assets.
There are several methods of depreciation, which can be used 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. Also, depreciation must be reported on a periodic basis. Many businesses depreciate assets on a monthly or quarterly basis; consult your accountant for advice about timing depreciation transactions for your company.
Since depreciation is reported on a periodic basis, you may want to create a recurring template for this purpose.
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