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How do I depreciate real property?

mgzarate1

Can someone help? tried to create a liability account for depreciation, but in my reports depreciation shows as a negative number

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Accepted answers

Tom Young

Well, depreciation is a "negative number" when it comes to calculating your net worth. The accounting is

Debit (increase) Depreciation Expense (a Category)
Credit (increase) Accumulated Depreciation (an Account)

Most commonly Accumulated Depreciation is a "contra" Account, an Account that's on the asset side of the balance sheet but is expected to have a negative number.

If your recorded transactions for depreciation are in line with the accounting shown above, then that's proper.

GeoffG

NotACPA said:

I'm not a business and I don't need to show the accumulated depreciation ... just the current value of the property.

Totally agree. Unless a H&B user, there is no reason to over complicate simple depreciation and the Net Worth and reporting work just fine.

All comments

Tom Young

Well, depreciation is a "negative number" when it comes to calculating your net worth. The accounting is

Debit (increase) Depreciation Expense (a Category)
Credit (increase) Accumulated Depreciation (an Account)

Most commonly Accumulated Depreciation is a "contra" Account, an Account that's on the asset side of the balance sheet but is expected to have a negative number.

If your recorded transactions for depreciation are in line with the accounting shown above, then that's proper.

GeoffG

The method I use is to decrease the asset account directly. Quicken allows for one sided entries. The example below illustrates how this can be done. The frequency is however you choose.

Image: https://us.v-cdn.net/6031128/uploads/editor/tf/81ffy9c36csa.jpg

I have set all depreciated assets with a reminder at various frequencies depending on the asset.

NotACPA

Technically, that's a self-referencing entry ... not "one sided". But that IS the method that I use also.

mgzarate1

Thank you so much for your help, I could not understand why in my reports it would show as a negative number in the outflows section and why my net worth is almost zero

Tom Young

@GoffG

@NotACPA

Mechanically a self-referencing entry in Quicken isn't a one-sided entry at all but instead follows double-entry accounting rules as the other side of the entry, the one that you can't see, is a direct entry to your net worth (equity) "Account."

But I don't understand why you'd resort to a self-referencing entry to account for depreciation. Depreciation is an expense as real as an expense associated with writing a check. To reconcile your changes in equity over a period, which ordinarily would track your "Overall Total" in a Spending report, you'd have to "plug" any self-referencing entries during the period to make that work.

mgzarate1

Thank you, I like the idea of creating 2 asset accounts and depreciating on one, that way it will show depreciation as a deduction and if I like to find out my net worth I will just not include the depreciation account, Do you think that will work?

Tom Young

@mgzarate1

That will work fine. With a new depreciable asset the accumulated depreciation Account would start at $0 and then grow (negatively) as you recognize depreciation expense. If you want to start this with the asset you've already been depreciating then create the accumulated depreciation Account with a $0 opening balance and simply transfer in the balance from your current liability Account.

NotACPA

@Tom Young

Why? K.I.S.S.

I'm not a business and I don't need to show the accumulated depreciation ... just the current value of the property.

Since I always use the same notation for depreciation, If I ever needed to see the accumulated sum I could just do a report for that "payee".

GeoffG

NotACPA said:

I'm not a business and I don't need to show the accumulated depreciation ... just the current value of the property.

Totally agree. Unless a H&B user, there is no reason to over complicate simple depreciation and the Net Worth and reporting work just fine.

mgzarate1

Thank you that really helped, for some reason in all the new asset accounts that I created the action button and the clock are missing, can anyone help with this issue?