Depreciation issue
Jacob
Member Posts: 4
I just started using Wave today because one of the biggest problems I've had with other apps is the difficulty with depreciating my tools/equipment. So after a friend show me this article https://support.waveapps.com/hc/en-us/articles/208623506-How-do-I-handle-depreciation-and-amortization- showing how easy it is in Wave I decided to give it a shot. I followed the article exactly until the last part of paragraph 9 where it states to select "depreciation and amortization" as a credit. That does not seem to be in the drop down as an option nor will it allow me to type my own.
Any thoughts?
0
Comments
Never mind, I totally screwed this one up and missed the step where I had to create the account for Depreciation and Amortization...
But now I'm not understanding a part of the overall process. After applying the journal transaction, the asset value does not change. And my profit/loss report just shows a loss. I thought adding the credit in that journal transaction would have balanced it out?
I'm just so confused.. lol.
Hi, @Jacob.
Depreciation can be a bit confusing. Let's see if I can clear things up.
The net value of your assets is (purchase cost of all assets) - (total depreciation). The purchase cost of your asset will not change retroactively, so that number stays the same. We just add credit amounts to Depreciation so that the net value of all of your asset stays accurate.
If you have a printer for $2,000, and $500 in Depreciation, the net value of your assets is $1,500.
Depreciation is handled this way to allow you to lump your assets into categories (say, Equipment), instead of treating every asset as its own account. If you have a lot of assets you'd rather join together, you can consider them a single asset account, and calculate the depreciation as a lump sum instead of an amount against every individual item.
That way, you can worry about how depreciation affects a specific piece of equipment only when it's relevant. Say you're selling that printer after a year and it's part of your Equipment account, you would just make this journal transaction...
It gets a little more complicated if you sell it at a profit (or at a loss) on top of that, but that's the basics.
If you want to read some more about this, I went in deep talking about depreciation with @Kendricks866 a few months ago. You can find that discussion here.
Hi @ Alexia
I have question regarding accumulated depreciation accounts available in wave. The don't seem to be editable. I want to create separate Acc. Depreciation accounts for different types of assets we have recorded. Is there a way to do this?
Hi, @ST_MJZ,
You can create it as a custom asset account. Just choose "Other long-term asset" in the list and you'll have the option to name the account yourself. You can create as many of those as you need.
The old version of Wave, which you are using, makes this process a little unintuitive. I can promise that, in the new version, doing the same thing is a much simpler job!
@Alexia Your example with selling the printer doesn't seem to make sense.
So, I've sold the printer for $1500. $1500 has been added to my bank account and I've disposed of the printer.
Your example instead debits $1500 from my bank account. That doesn't make sense. That doesn't match what actually happened.
It would seem that I should credit $1500 to my bank account, debit equipment (the asset account) $2000 (as that asset is now gone) and debit Depreciation $500 (we normally credit it when recording a depreciation expense).
When you receive money into your bank account that is always a debit entry in the bank account, and when you pay out from your bank that is always a credit entry in the bank account - basic double entry book keeping, not something unique to Wave
I think you created your journal transaction with a date ahead of time. This is usually the case as you want the depreciation to probably reflect at year end, etc. This is the reason no changes had reflected in your reports.