how to enter expenses in quickbooks 2011

Look at the asset and be honest… is it durable beyond one year or not? If yes, capitalize it. Tools and taxes can be sticky and complicated but it really doesn’t have to be. That can get a little complicated so I’d advise that you check with a tax professional on those rules and if you should exercise them or capitalize and depreciate the asset. To complicate matters, you can elect to expense a capital item in the year purchased using Section 179 Depreciation rules. Here are a few examples of tools and equipment that you would most likely capitalize and depreciate: Here are a few other common business expenses that you will want to keep track of: Utilities, Car and truck expenses (like maintenance), Advertising, Employee salaries, Trade association dues, Rent expense, Supplies, Continuing education, and Business licenses…to name a few.

Small tools expected to last one year or less.

Here are a few examples of tools that are deductible in the year of purchase: When a tool is considered to be durable or useful beyond one year, it is typically capitalized (recorded as an asset on the balance sheet) and depreciated (expense is split out over several years instead of just one).

Second, let’s talk about capitalization and deprecation. It does not have to be indispensable to qualify or classified as necessary. To be considered “necessary”, an expense should be helpful and appropriate for your industry.

An “ordinary” expense is considered to be something that is common and accepted in your industry – in this case, the construction industry. Any business expense that is considered to be ordinary and necessary is deductible.

But how do you know when you can expense a tool and when you should capitalize a tool and depreciate (expense) it over time? Here are a few tips.įirst off, let’s define expenses from the tax perspective. Buying and providing them can get expensive. Sure you may view them as “tools of the trade” – but the IRS thinks differently!Ĭonstruction is by nature a tool driven industry. In the construction industry, for tax purposes, you do treat the purchase of a hammer and a cement mixer differently.

How to enter expenses in quickbooks 2011