How do I enter a 0% 12 month purchase for a credit card so payments show in reports?

RCinNJ
RCinNJ Member ✭✭✭✭
edited March 25 in Reports (Mac)
I'm really not sure where (or how) to ask this. I purchased a computer with a new Apple Card. Payments are made on this purchase over 12 months with no finance charges. However, it is still a credit card and can be used for other purchases that get paid monthly. For my Apple Card in QM I entered the full price of the computer and set up a 12 month payment schedule so the full amount ends with $0 due. I just realized that when I run my business expense report the full price of the computer shows as an expense and none of the monthly payments show. I changed the Category name for the cost of the computer so it does not show, but the payments still don't show in the report. Obviously, this is wrong and the monthly payments should show on this report. How should this be set up so the monthly payments show? I have attached a screen show showing how I have it set up. Since the first payment was in January I don't have to worry about it for 2021 taxes, but would really like to understand and solve this. Thanks for any help!

Best Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited February 22 Answer ✓
    "I just realized that when I run my business expense report the full price of the computer shows as an expense..."
    That is the generally used accounting for equipment purchases that are expensed "up front." 
    "and none of the monthly payments show."
    You can't expense the same piece of equipment twice.  The monthly payments aren't expenses, they simply represent the pay down of a liability.  The payments show up entirely on your balance sheet - cash goes down and liability goes down in an equal amount.  The payments don't flow through your P&L and the payments don't decrease your net worth.
    " I changed the Category name for the cost of the computer so it does not show, but the payments still don't show in the report. Obviously, this is wrong and the monthly payments should show on this report."
    No, you're still trying to expense the computer twice, whether it "shows" (on your P&L I presume) as any "Category" is an expense, and you also want to show the payments as expenses.
    "How should this be set up so the monthly payments show?"
    If you want to show the monthly payments as a form of "expense" you don't expense the computer up front, you show each payment as a form of expense by charging the payment to a Category, like you're showing in your picture.
    "Since the first payment was in January I don't have to worry about it for 2021 taxes, but would really like to understand and solve this."
    You can either expense the entire computer in the date of purchase and pay down the liability over the remainder of the year, or you can go the route of expensing the computer "piecemeal" with the 12 payments.  Either way gives you the same result.

    Here's the important thing to understand, accounting wise.  If you've set you a liability on your balance sheet payments against that liability are not "expenses" ("Categories" in Quicken-speak) they are simply reductions of a liability, and your cash.  The most obvious "personal" example is a mortgage.  When you take out a mortgage you don't declare "income" and when you pay down a mortgage you don't declare an "expense."
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Answer ✓
    I'll add a few thought to what Tom has correctly stated above...

    A transaction in Quicken can either use a category to specify the appropriate income or expense, or can be a transfer between assets and liabilities, which is not an expense. Although Quicken Mac currently allows you to put a category on a transfer, as you have done, the developers have acknowledged this is improper accounting — a vestige of the 12-year-old program whose code was used as the base for the current Quicken Mac — and that they will at some point prevent users from doing so. 

    Typically, for most Quicken users, you would record a purchase in the credit card account, using the appropriate expense category. That creates the credit balance owed on the card. As you make each monthly payment, you'd enter a transfer from checking to the card to reflect the payment against the outstanding balance, and those transfers would not be expenses. That would mirror what's happening in the real world accounts: one big liability in the credit card account to start, followed by monthly deductions from checking to reduce the credit card balance. 

    If you were doing this like a business, you would record the purchase as a transfer from checking to an asset account for equipment. No expense. And then each month over the useful life of the equipment or some other depreciation schedule, you would record a transaction in a separate Accumulated Depreciation asset account categorized to Depreciation Expense. In the end, you would still have the original asset account at its full value, and you'd have the contra-asset accumulated depreciation account at the same value; the two would add to a book value of zero once the computer is fully depreciated.

    Most Quicken users with small businesses don't want to go through all that! And depending on your business, most users would prefer to take the entire deduction right away (a Section 179 deduction) rather than spreading it over the useful life or some other allowed term for business depreciation. Is there a reason you don't want to deduct the whole thing as a 2021 expense? That would give you the tax break in 2021, and you could then do the simple method in Quicken of recording the purchase as the expense and then recording the monthly transfers as reducing the outstanding debt on the credit card. 


    Quicken Mac Subscription • Quicken user since 1993

Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited February 22 Answer ✓
    "I just realized that when I run my business expense report the full price of the computer shows as an expense..."
    That is the generally used accounting for equipment purchases that are expensed "up front." 
    "and none of the monthly payments show."
    You can't expense the same piece of equipment twice.  The monthly payments aren't expenses, they simply represent the pay down of a liability.  The payments show up entirely on your balance sheet - cash goes down and liability goes down in an equal amount.  The payments don't flow through your P&L and the payments don't decrease your net worth.
    " I changed the Category name for the cost of the computer so it does not show, but the payments still don't show in the report. Obviously, this is wrong and the monthly payments should show on this report."
    No, you're still trying to expense the computer twice, whether it "shows" (on your P&L I presume) as any "Category" is an expense, and you also want to show the payments as expenses.
    "How should this be set up so the monthly payments show?"
    If you want to show the monthly payments as a form of "expense" you don't expense the computer up front, you show each payment as a form of expense by charging the payment to a Category, like you're showing in your picture.
    "Since the first payment was in January I don't have to worry about it for 2021 taxes, but would really like to understand and solve this."
    You can either expense the entire computer in the date of purchase and pay down the liability over the remainder of the year, or you can go the route of expensing the computer "piecemeal" with the 12 payments.  Either way gives you the same result.

    Here's the important thing to understand, accounting wise.  If you've set you a liability on your balance sheet payments against that liability are not "expenses" ("Categories" in Quicken-speak) they are simply reductions of a liability, and your cash.  The most obvious "personal" example is a mortgage.  When you take out a mortgage you don't declare "income" and when you pay down a mortgage you don't declare an "expense."
  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Answer ✓
    I'll add a few thought to what Tom has correctly stated above...

    A transaction in Quicken can either use a category to specify the appropriate income or expense, or can be a transfer between assets and liabilities, which is not an expense. Although Quicken Mac currently allows you to put a category on a transfer, as you have done, the developers have acknowledged this is improper accounting — a vestige of the 12-year-old program whose code was used as the base for the current Quicken Mac — and that they will at some point prevent users from doing so. 

    Typically, for most Quicken users, you would record a purchase in the credit card account, using the appropriate expense category. That creates the credit balance owed on the card. As you make each monthly payment, you'd enter a transfer from checking to the card to reflect the payment against the outstanding balance, and those transfers would not be expenses. That would mirror what's happening in the real world accounts: one big liability in the credit card account to start, followed by monthly deductions from checking to reduce the credit card balance. 

    If you were doing this like a business, you would record the purchase as a transfer from checking to an asset account for equipment. No expense. And then each month over the useful life of the equipment or some other depreciation schedule, you would record a transaction in a separate Accumulated Depreciation asset account categorized to Depreciation Expense. In the end, you would still have the original asset account at its full value, and you'd have the contra-asset accumulated depreciation account at the same value; the two would add to a book value of zero once the computer is fully depreciated.

    Most Quicken users with small businesses don't want to go through all that! And depending on your business, most users would prefer to take the entire deduction right away (a Section 179 deduction) rather than spreading it over the useful life or some other allowed term for business depreciation. Is there a reason you don't want to deduct the whole thing as a 2021 expense? That would give you the tax break in 2021, and you could then do the simple method in Quicken of recording the purchase as the expense and then recording the monthly transfers as reducing the outstanding debt on the credit card. 


    Quicken Mac Subscription • Quicken user since 1993
  • RCinNJ
    RCinNJ Member ✭✭✭✭
    Tom & Jacobs, thank you for your answers. Clearly accounting is not my strong point. I now understand better. I'll speak with my accountant about this.
This discussion has been closed.