Multiple category entries

[Mike or Penny Novack]

David Therkelsen wrote:

>I am a newbie with respect to accounting software, although once, very long
>ago (more than 2 decades) I earned a minor degree in accounting.  Sigh.
>
Apparently you haven't used your accounting learning since school.

>
>In a business I have started, I have purchased a computer at a cost of $500. 
>I have credited my 'Checking Account' asset for that amount, lessening its
>value by $500.  I have debited an asset account called 'Equipment Assets',
>increasing its value by $500.  So far, so good.
>
>I also need to show the computer purchase as an expense of $500.  I have
>debited an expense account called 'Computer' for this amount.  In the
>'Transfer' column of this transaction, my first response was to debit the
>same 'Equipment Assets' account as above, but of course that results in two
>$500 dollar entries to that account, making it look as though I made two
>purchases and have $1000 in assets.
>
>Looking at the language, it seems that I need to credit an expense account
>to balance this transaction, but that doesn't make sense.
>
>Certainly I'm making a bad assumption in what I have done here, but I don't
>know what it is.
>
>Please help an old guy.
>  
>
IF you are entering the computer as a "fixed asset" then its cost isn't 
an expense. How does it eventually become an expense? That happens when 
you enter its depreciation. First step is to determine/decide what your 
policy for depreciating fixed assets will be (and what durable things 
purchased will be immediately "expensed" rather than treated as a fixed 
asset because below the "de minimis" amount you have for fixed assets in 
your policy. Note that depending on what sort of entity the books are 
being kept, some government authority may be specifying that policy for you.

But OK, to refresh your memory, let's take for example a policy "fixed 
assets will be depreciated over four years" and that you have a "de 
minimis" amount of $100 (so if you buy a steel ruler,durable, expected 
useful life decades, you immediately make this an "office supplies" 
expense, not a fixed asset). At the end of the year, you enter the 
transactions to record depreciation and in the case of this computer 
that would be a debit of $125 to computer expense and a credit of $125 
to computer  with a description "depreciation for 2014".

Remember now?

Michael D Novack