How to Record Depreciation in QuickBooks

To record depreciation in QuickBooks, create a fixed asset account for the item and an accumulated depreciation contra-asset account, then post a journal entry each period that debits Depreciation Expense and credits Accumulated Depreciation. QuickBooks does not calculate depreciation for you, so you take the amount from your accountant or a depreciation schedule and enter it. This guide covers setting up the accounts, posting monthly or yearly depreciation, handling Section 179 and bonus depreciation, and writing off an asset when you sell or scrap it, in both QuickBooks Online and Desktop.

Depreciation only makes sense once the asset purchase itself is in your books. If the equipment or vehicle you bought is missing from your register because it cleared on a statement that never imported, convert your PDF bank statement to QuickBooks with the tool at the top of this page so the original purchase is recorded before you set up the fixed asset and start depreciating it.

What is depreciation and why record it in QuickBooks?

Depreciation spreads the cost of a long-lived asset across the years it is used, instead of expensing it all at once. When you buy a $12,000 piece of equipment expected to last six years, you do not deduct $12,000 in year one. You move a portion to expense each year so your profit and loss reflects the real cost of using the asset over its life. Recording it in QuickBooks keeps the asset on your balance sheet, builds up accumulated depreciation against it, and gives your tax preparer the numbers they need.

How do I set up a fixed asset account in QuickBooks?

Set up a fixed asset by adding two accounts to your chart of accounts. In QuickBooks Online, go to Chart of accounts, New, choose the Fixed Assets account type, and name it for the item, for example "Equipment" or "Vehicles." Then add a second Fixed Assets account named "Accumulated Depreciation" that holds the running total of depreciation taken. In Desktop, add a Fixed Asset account and a matching Accumulated Depreciation subaccount from Lists, Chart of Accounts. Record the original purchase to the fixed asset account at its full cost.

How do I record a depreciation journal entry in QuickBooks?

Record depreciation with a journal entry that debits Depreciation Expense and credits Accumulated Depreciation for the same amount. In QuickBooks Online, click New, Journal entry, enter the date, debit the Depreciation Expense account, and credit the Accumulated Depreciation account for the period's amount. In Desktop, use Company, Make General Journal Entries with the same two lines. The entry lowers your net income by the expense and lowers the asset's book value on the balance sheet, without touching your bank account.

Should I record depreciation monthly or yearly?

Record depreciation monthly if you want accurate month-to-month profit, or yearly if your accountant only calculates it once at tax time. Monthly entries give you a truer picture of profitability through the year, which matters if you review financials or apply for financing. Many small businesses instead book a single year-end entry that their accountant provides. Either is acceptable as long as the full year's depreciation is recorded by the time you close the books. A recurring or memorized journal entry makes monthly depreciation quick to repeat.

How do I handle Section 179 or bonus depreciation in QuickBooks?

Handle Section 179 and bonus depreciation as tax elections that your accountant applies on the tax return, not automatic QuickBooks features. Section 179 and bonus depreciation let you deduct a large share, sometimes all, of an asset's cost in the year you place it in service. In your books you still record the asset and can post the accelerated depreciation your accountant calculates as the journal entry. Because the tax and book amounts can differ, confirm the figure with your preparer before you post it so your records match the return.

How do I write off an asset I sold or scrapped in QuickBooks?

Write off a disposed asset by removing both the asset and its accumulated depreciation, then booking any gain or loss. Create a journal entry that credits the fixed asset account for its original cost, debits accumulated depreciation for the total taken, records any cash you received from the sale, and posts the difference to a gain or loss on disposal account. This clears the item off your balance sheet. If you sold the asset, the deposit shows on your bank statement, so make sure that deposit is recorded and matched to the disposal entry. You will usually need the original purchase invoice to confirm the asset's cost, and you can turn a scanned supplier invoice into a data file if you no longer have the figures handy.

Does QuickBooks calculate depreciation automatically?

No, QuickBooks does not calculate depreciation automatically in the standard Online or Desktop products. You decide the method and useful life, or take the amount from your accountant, then enter it as a journal entry. QuickBooks stores the asset, tracks accumulated depreciation, and reports book value, but the calculation is up to you or your tax preparer. Some third-party fixed asset apps connect to QuickBooks and compute schedules if you manage many assets, but for a handful of items a simple schedule and a recurring journal entry are enough.

Get the asset purchases into QuickBooks first

Clean depreciation starts with the asset actually being on your books at the right cost. If you are catching up several years or setting up assets bought before you started using QuickBooks, convert the PDF bank and card statements that show those purchases so each asset is recorded with its real date and amount. From there you can set up the fixed asset accounts, post depreciation, and hand your accountant a balance sheet that ties out. For related workflows, see how to set up your chart of accounts and how to record prior-year transactions when you are bringing older activity into QuickBooks.