Quickbooks 2019 Tutorial for Beginners - How to Record the Purchase of a Financed Asset

QBUniversity.org - In this Quickbooks 2019 tutorial for beginners I walk through how to record the purchase of a financed asset.
If there is ever an area in Quickbooks where people have trouble, this is it!. In this video, I walk through the 2 most common ways to record the purchase of a financed asset (like a vehicle with a loan). This should clear up any confusion for you.
Discover the top mistakes most Quickbooks users make and how to fix them at QBUniversity.org

[@julioluna299]

Omg! thank you for fully explaining this and making it so easy to understand.

[@QbuniversityOrg]

Welcome!

[@lisacyr4811]

Thank you very much! You made it very easy to understand and my QB balance perfectly! :-)

[@QbuniversityOrg]

You're welcome!

[@gtgigi69]

Hello , thank you for you helpful videos! I have a question would I do the same process if the Equipment was leased? We you lease something you don’t pay interest. also be considered a fixed?

[@benjaminbrack2588]

Hello, I really appreciate your videos and they have been extremely helpful in my business. Thank you. My question is when purchasing a fixed asset and you put the asset in "Fixed Asset List" then I used the check method rather than journal entry method at the time how do I show the purchased asset in the items tab of the writing a check method and show the loan and the down payment as well? Do you show all steps in the items tab or only show the asset in the items tab and the loan and down payment in the expense tab? Thank you for your time.

[@QbuniversityOrg]

You would show the fixed asset in the Item tab and the loan and down payment in the expenses tab

[@jamiemendoza6979]

Good Afternoon, I know that this may be off topic to this video but I think it can be similar. I recently lost a lawsuit and need to make one inital payment and then start payments monthly for a year starting Jan. 2021. For example, let say hypothetically the lawsuit settlement was for $50,000 and I have to pay $10,000 now and the remaining balance in the 12 months of 2021. Would that entry be similar to a car loan, I would have to create a chart of account and then begin making payments from that chart of account?

[@richardogweri9008]

Thank you sir,

[@QbuniversityOrg]

Welcome!

[@spanky88ism]

Thank you very much! Just to clarify should we be braking down the fees associated with purchase. Such as sales tax, vehicle registration fees, etc?

[@QbuniversityOrg]

No you shouldn't. Those all go into the cost basis of the asset

[@user-py2mi8jr2p]

This is very helpful. What about when making payments to that loan? How to you extract the interest from the principal so that it does not deduct from the long term liability?

[@cynthiareyes9827]

Thank you for these videos. I do have a question though. How do I enter a rebate on the vehicle purchase? The rebate was used towards the down payment and an actual down payment was made as well.

[@QbuniversityOrg]

You just reduce the purchase price of the vehicle by that amount.

[@edwardshelton914]

I had this scenario but it also included a vehicle traded in so I was not sure how to reflect that.

[@QbuniversityOrg]

You would do it the same way, reflecting the full purchase price before trade in. The trade in would have to be reflected as a sale of that vehicle.

[@irenekodsy7320]

Thank you for the clear info. It's very helpful. My question is... how to close the asset account when I sell the vehicle?

[@QbuniversityOrg]

Irene Kodsy search my channel I believe I have a video on this but essentially you credit the cost of the asset and debit the accumulated depreciation. To do this you would need to do a journal entry

[@irenekodsy7320]

@@QbuniversityOrg Thank you for your prompt response.

[@QbuniversityOrg]

Irene Kodsy you’re welcome!

[@avacaspian]

Hello, I really appreciate your videos; they are very helpful. I have a question that I couldn't find the answer to anywhere else. My tenant issued a security deposit cheque to my agent. Both the landlord and tenant's agents deducted their commission from the cheque and re-issued the remaining amount of the cheque to me by my real estate agent's company. How do I record this? I would greatly appreciate any direction you can give me. Thank you

[@QbuniversityOrg]

Answered this on another post

[@vanessaperez7470]

After recording the purchase of a financed asset, the following payments after the down payments follow the same steps or do the fixed asset amount change as the payments are being made?

[@QbuniversityOrg]

The fixed asset amount won’t change just the principal amount of the loan as you make payments

[@user-wr6lc8wv7b]

With a financed equipment do which cost do we use the "sales price" or total cost to own (which includes taxes and admin fees)?

[@QbuniversityOrg]

It’s the total cost

[@Mymusicfmw33]

Great timing. I’m entering a vehicle lease. I’ll go with the journal entry. (There was no down payment.). My question is when I make the monthly payment via EFT which account to do I put it to? The vehicle loan LIABILITY? Thank you.

[@QbuniversityOrg]

MS Cellaneous yes but you want to break it out between principal and interest. See my other video on using the Loan Manager

[@Mymusicfmw33]

The Quickbooks University Perfect. You’ tutorials are great for this novice. I am always learning.

[@QbuniversityOrg]

MS Cellaneous thanks!

[@benborroel4166]

Good afternoon, how do I record a purchase of a vehicle in full? In 2019 I purchased a truck for my business but I paid it in full. In the moment it’s just a check to the Dealership and it was labeled as an expense, which I know isn’t correct. How do I insert the asset without a loan but show that the asset is paid off?

[@QbuniversityOrg]

Try this in this video: kzbin.info/www/bejne/eaGue2BqpbaCjNk

[@Mymusicfmw33]

Oh. One more question if you don’t mind. Should I break up the interest portion and the sales tax paid for the vehicle purchase in the GL fixed asset vehicle account? Essentially I’d have 3 entries: sticker price, sales tax, and interest in the Fixed Asset Vehicle account. . Then for the vehicle loan liability entry, it would be the total of those 3 items. Thank you, again.

[@QbuniversityOrg]

MS Cellaneous nope actually the total of all the extra costs would go into your cost basis. You do not break them out when you purchase. When you make the loan payments you break out the payment between principal and interest.

[@Mymusicfmw33]

The Quickbooks University Thanks a million!!

[@QbuniversityOrg]

@@Mymusicfmw33 you're welcome!

[@LM-tz9js]

Thank you for your video. I have a question regarding appraisal fee. We paid appraisal fee for building that we was thinking to purchase, we may not do it . Should I record it as an expense and then transfer to fixed assets if we’ll purchase? Thank you.

[@QbuniversityOrg]

Yep that's exactly what I would do!

[@LM-tz9js]

The Quickbooks University thank you!!

[@QbuniversityOrg]

Lana Milis You’re welcome!

[@amigoslandscaping1461]

What if I just started a new llc. I use my personal truck for my business all the time. Can I sell my car to my LLC and transfer ownership? If so how would that work as a write off? Thank you, great vid

[@QbuniversityOrg]

You could do that but you may have a personal gain when you sell, and you cannot take a section 179 write off for an asset you purchase from yourself. The best way in this situation is to track business mileage and have the business reimburse you for business mileage - it's a deduction to the business and tax free money to you

[@marcosdellavalle2309]

Hello, do you have a video that shows a sale of fixed asset such as a vehicle, can you send me the link? please

[@QbuniversityOrg]

I would have to check, I believe I do. Have you tried searching just my channel?

[@iang2424]

I just have one question and I watched the recording payments for note payable also. I have a filing fee that they included with the loan but no interest. They amortized the fee over the life the loan but they treated it like interest. Should I leave the fee alone and just record the beginning note or make the fee another liability subclass under the note since it is a fixed total amount and have it decrease just as the note does each month? Thanks.

[@QbuniversityOrg]

I would just leave it alone and record it each month as you pay it

[@iang2424]

@@QbuniversityOrg Okay that’s what I was leaning towards. Thanks!

[@QbuniversityOrg]

@@iang2424 welcome!

[@pheapolyka963]

May I know the meaning of purchase a van with a loan is? Is it we purchase but pay in depreciation ?

[@QbuniversityOrg]

It's when you buy a van and finance it with a loan

[@BA-wr2zm]

Did this transaction affect the profit and loss part?

[@QbuniversityOrg]

No it would not

[@timbaker6108]

Is there anything wrong with this approach? I set up a Fixed Asset Item for the Vehicle using the purchase price and pointing it to the Vehicle account on the COA. I then used the Write Check function, put the amount due to the Dealership in the Check Amount, chose the Fixed Asset Item which prefilled with the purchase price. I then went to Expenses and made the entry for the Loan. The Balance Sheet looks correct. Is there a particular advantage in doing this?

[@QbuniversityOrg]

Tim Baker I would have to look at it, but it sounds like it would work. It’s just a lot of additional steps!

[@timbaker6108]

@@QbuniversityOrg It seems to work just fine. I want to go ahead and list all fixed assets in the Fixed Asset Items, so this process allows me to tie the purchase and financing activity to that particular Fixed Asset Item. I will email screenshots.

[@QbuniversityOrg]

Tim Baker sounds great! You may want to also look into the Fixed Asset Manager

[@timbaker6108]

@@QbuniversityOrg I did, but it is not available with my Quickbooks 2019 Premier Desktop. I liked it. Sending an email now.

[@tomvasquez2546]

After I complete all the steps above, In order to make a payment, I do the same thing, correct? Because when I go to do that, the fixed asset and long term liability are set to zero and I made a $500 payment which recorded in the general ledger and on my register. I just want to make sure that I don't have to keep inputting the fixed asset and long term liability amounts when making payments. Thanks.

[@QbuniversityOrg]

No you don't keep doing that. When you make a payment it only reduces the principal on the loan and records interest expense, it does not affect the asset

[@tomvasquez2546]

@@QbuniversityOrgis there anyway that I can contact you in regards to this? I am new at this. Thanks

[@QbuniversityOrg]

@@tomvasquez2546 unfortunately due to my schedule and current client load we only work with clients on Outsourced accounting and tax planning

[@JOSEGONZALEZ-wx9fb]

Great tutorial, very detailed. I have a similar case that I can figure out. An equipment was purchased for 5k, it was financed by a third party paying for the loan $141.41 for 60 months totaling $8,484.60. How do you record this purchase if the liability amount is higher than cost of the fixed asset?

[@QbuniversityOrg]

I would get the purchase papers. That difference is essentially interest expense. So it sounds like the loan was for $5k but over the term of the loan you are paying $5k principal and the rest interest

[@JOSEGONZALEZ-wx9fb]

@@QbuniversityOrg exactly. The purchase price was 5k but the loan will be for 8k over the course of 5 years. I record it as follows: Equipment. 5k Interest expense. 3k Long term liability 8k I’m not sure this is the better way to do this but I couldn’t think of anything else.

[@QbuniversityOrg]

@@JOSEGONZALEZ-wx9fb No you would record as Equipment $5k and liability $5k, then as you make payments, you split them between principal and interest so that principal goes to zero over the term and interest is recorded as you pay it.

[@JOSEGONZALEZ-wx9fb]

That makes more sense thank you very much. You are a life saver

[@QbuniversityOrg]

@@JOSEGONZALEZ-wx9fb you’re welcome!

[@mikejohnston6894]

Great videos. I am having trouble finding an answer to my specific question. I am a new bed & breakfast owner and we live in the house that is also the business. I have a new mortgage and I want to set up the loan and fixed asset accounts properly. Using easy numbers, if my purchase price for the home plus land is $500,000 and my dedicated B&B space within the home is 25%, how would I set up my accounts? Do I used the full $500k (dwelling plus land), do I take the $100k off for land and use $400k for the dwelling only, or do I use $100k (25% of the $400k for the home alone - business portion only). Hopefully you see my confusion. Thank you in advance for any assistance you can provide.

[@QbuniversityOrg]

Yep what I would do is use $25,000 for the land and $100,000 for the building for the business price. I would also record 25% of the mortgage

[@mikejohnston6894]

@@QbuniversityOrg Thank you for the quick reply. By 25% of the mortgage, you mean the monthly payment for mortgage, right? My utilities, insurance, taxes, etc. are all also entered at 25% of the actual amount?

[@QbuniversityOrg]

Mike Johnston yes but also record 25% of the mortgage loan balance as a liability on the books

[@mikejohnston6894]

@@QbuniversityOrg Understood. Thanks again. Your videos are a great help to this newbie!

[@QbuniversityOrg]

Mike Johnston you’re welcome!

[@cayosantos7637]

How do I account for a manufacturer's rebate? "Added" $5,000 to the down payment technically, but no cash transaction representing that decrease towards the financed amount. Thanks in advance!

[@QbuniversityOrg]

The rebate simply lowers your cost basis in the asset. It’s like a discount

[@cayosantos7637]

@@QbuniversityOrg Gotchya so if full purchase price was 40k, I would enter asset value at 35k? PS: Thank you so much! You are hands down the most helpful and detailed when it comes to this stuff. Surprised you don't have a million subs lol.

[@QbuniversityOrg]

Cayo Santos yep that’s exactly right. And you’re welcome! Ha I wish I had a million subs!

[@deborahklein8634]

what if the down payment is made with a credit card?

[@QbuniversityOrg]

Deborah Klein in the journal entry you would specify the card instead of the checking account. With the other way, you would enter it the same way as a check, except you would make the entries under Enter Credit Card Charges

[@stephaniemunson8798]

Great info! I have a quick question, we have decided to start using QB for our business. We have a Vehicle Financed in 2018 Purchased for 50k the current loan amount due is 25k how do I record the 25k that has been paid off over the last few years? Any direction is greatly appreciated :)

[@QbuniversityOrg]

You would have to go back and record the opening balance sheet from when you started using Quickbooks - this would be your best bet to be honest. That way you would have all the accounts recorded correctly in QB

[@brasstacksbookkeeping7987]

@@QbuniversityOrg So how do you do that? Do you have a video to show how to record the opening balances on older loans for the current year? All the training videos are for new loans like this one.

[@QbuniversityOrg]

@@brasstacksbookkeeping7987 I do have a video on recording opening balances in accounts. You would have to search the channel. Essentially you can enter the opening balance in the account setup screen when you are setting up the account

[@erinbsullivan444]

@@QbuniversityOrg Ok. Thank you!

[@QbuniversityOrg]

@@erinbsullivan444 welcome!

[@marketbuy]

Hi Mat, I watched this video a few times. I bought an EV for say $50K. I followed both methods (journal entry and check writing). I paid all cash for my EV. The balance sheet shows $50K in the Balance Sheet under Fixed Asset. My issue is that the $50K does NOT show as a “vehicle expense” under the P&L for the amount of $50K. So in your case, shouldn’t the $3000 amount be in your P&L as a vehicle expense? What am I doing wrong, if any? Thank you

[@QbuniversityOrg]

No, it’s not going to be on the profit and loss statement. Because it’s an asset that you spent $50,000 on, it’s only going to be on the balance sheet. The $50,000 gets written off overtime on the profit and loss through a depreciation expense.

[@marketbuy]

@@QbuniversityOrg Thank you for the quick reply! When i sent the question to you i, realized it needs to be expensed over time. On a 5 yr straight line depreciation, my annual depr expense is $10K. If I used the car 80% of the time for business, do I record on QB as 8K expense, or should it still be $10K?

[@QbuniversityOrg]

I would do the $8000

[@marketbuy]

@@QbuniversityOrg Am I absolutely required to record my depreciation expense starting in 2023 from the year I bought the vehicle, or can I start to record depreciation expense in 2024? I ask because my 2023 Profit and Loss will show a negative number if I record the $8000 depreciation expense.

[@NancywithEthan]

So.I have a question, after recording the loan with 0 down payment, how should I record the monthly payment?Thank you

[@QbuniversityOrg]

When you enter the bill you will "split" the payment out between principal and interest

[@NancywithEthan]

@@QbuniversityOrg appreciate

[@QbuniversityOrg]

@@NancywithEthan welcome

[@marketbuy]

I have an issue. I purchased an old truck in 2018 for $3200 that still shows as an asset. I have never recorded the depreciation as an expense. The asset still shows on my books. Fast forward today, how do I close out this asset without impacting my onhand balance? TIA

[@QbuniversityOrg]

Did you sell it or get rid of it?

[@marketbuy]

@@QbuniversityOrg I still own it

[@QbuniversityOrg]

@@marketbuy I would do a journal entry debit in depreciation, expense and crediting accumulated depreciation for the full amount. Technically that expense should’ve happened each year since 2018 so this is kind of a catch-up entry.

[@marketbuy]

@@QbuniversityOrg As a novice, I did not know to depreciate the assets on a a yearly basis. Oops.

[@QbuniversityOrg]

@@marketbuy yeah not a huge deal. Just want to make sure you don’t miss out on tax deductions!

[@meypuim2951]

Hi there. I have a question. So I did a journal entry for a surcharge rebate of $9 . I debited the bank account and credited income account. But my boss told me to expense it because it's not really income. So I went back to the journal entry and changed the income account to an expense account, called it bank fee. But I didn't credit the bank account and debit the expense account. When I go into the profit and loss statement, the $9 no longer shows up as income. Instead it shows up as an expense. This is after I've already reconciled. I just don't understand how it's able to balance out.

[@meypuim2951]

Maybe this is a refund journal entry I want to do? The surcharge rebate is an ATM credit. So is this considered like a refund journal entry?

[@QbuniversityOrg]

@@meypuim2951 sounds like it. Did you get the $9 or pay it. If received it would be a debit to checking and a credit to income. If an expense it would be a credit to checking and a debit to expense

[@meypuim2951]

@@QbuniversityOrg I got the $9. But it's not considered income. It's more like a refund. So I was told to expense it, even though on the journal entry, I have it as a debit to the bank and credit to income. So when I changed the income account to bank fee expense account on the journal entry, the $9 now shows up as a negative number in the expense account.

[@QbuniversityOrg]

@@meypuim2951 that’s correct. A credit to an expense is like a negative expense (ie income)

[@meypuim2951]

@@QbuniversityOrg now I understand. Even though it shows up as a credit in the bank statement, you have to credit the expense because there had to have been a prior transaction that debited the expense account. So that's why to show a refund, you credit the expense account.

[@ericgonzalez524]

what if I only use the vehicle for 40% of business, would I still enter full amount?

[@QbuniversityOrg]

I would enter the full amount and then adjust out the 60% as personal use on your tax return

[@cire1013]

@@QbuniversityOrg thank you. Love your videos by the way. I have one other question. Should I pay all the expenses, i.e car payment, insurance, gas, and so on using my personal account or should I use by business account to pay for the percentage used. That is the part that confuses me the most

[@QbuniversityOrg]

@@cire1013 well in theory, if the car title is in your personal name, then for legal reasons you want to pay everything personally, then submit an expense report for business mileage each month and reimburse yourself. This way you keep it separate and only reimburse yourself for the business mileage portion

[@marketbuy]

Hi. How do I record SepIRA in QB? Thank you!

[@QbuniversityOrg]

If it is being recorded in one year and paid the next then in the year it is for, you have to do a journal entry crediting the liability and debiting the SEP IRA expense. If you are doing it in the year its for it goes straight to the expense

[@marketbuy]

The Quickbooks University . Thank you. Somehow I thought maybe I would write myself a check and record it under Owner Equity Withdrawal -SEPIRA to show that the money came out of the bank checking account and into my SEPIRA via Owner Equity Withdrawal. It never occurred to me to “expense it” like the way you explained it. I haven’t checked other KZbin videos if anyone does it differently. Your was the first that I viewed. Thank you

[@QbuniversityOrg]

@@marketbuy A SEP-IRA contribution through a business for you and for employees is an expense that you can deduct. If this is a traditional or ROTH then you would put it to an Owners Draw

[@marketbuy]

The Quickbooks University. Ok, thank you! This SEPIRA is for 2019 but I made payment two months ago (May 2020). I didn’t realized my contribution is an expense and can be used as a write off. I supposed this will make a difference between recording it as an expense vs owner equity withdrawal.

[@QbuniversityOrg]

@@marketbuy yeah it absolutely will. And if you had not filed the business return by the time you made the contribution, you can deduct it for 2019