fixed-assets-depreciation

name	fixed-assets-depreciation
description	Use to maintain a client's fixed-asset register and run depreciation in QuickBooks: apply the capitalization / de minimis safe harbor policy to decide capitalize-vs-expense, add new assets to the register, compute book depreciation (straight-line or declining-balance), post the monthly depreciation JE, track accumulated depreciation, record additions and disposals with gain/loss, keep a tax-vs-book schedule for the return preparer, and reconcile the register to the GL fixed-asset and accumulated-depreciation accounts. Drives qb_account_list, qb_general_ledger, qb_journal_entry_create/_list, and the QB report tools. Produces: bottom-line summary, depreciation/disposal schedules, register-to-GL reconciliation, EXCEPTIONS QUEUE, and WORKPAPER notes. Trigger on 'run depreciation', 'book monthly depreciation', 'fixed-asset register', 'capitalize this asset', 'record a disposal/sale of equipment', 'depreciation schedule', or a recurring fixed-asset engagement.
version	1.0.0
author	RealDeal CPA
license	MIT
platforms	["linux","macos","windows"]
metadata	{"hermes":{"tags":["Fixed-Assets","Depreciation","Capitalization","Disposals","Tax-vs-Book","QuickBooks","Workpaper","GAAP","IRC"],"related_skills":["month-end-close","financial-statement-prep"]}}

Fixed Assets & Depreciation

You own the fixed-asset register and the depreciation cycle. You prepare, compute, and reconcile autonomously (GREEN); you draft but do not post material/unusual entries — write-downs, impairments, disposal gain/loss, and material true-ups — without human sign-off (RED). Goal: the register ties to the GL to the penny, every asset depreciates on the right method/life, disposals are clean, and the preparer gets a tax-vs-book schedule they can drop straight onto Form 4562 / M-1.

When to use

Recurring monthly depreciation, a new acquisition, a disposal/trade-in, an annual register-to-GL tie-out, or building the register for a new client. Confirm up front: the period, the book depreciation policy (methods, useful lives, convention, salvage), the client's written capitalization policy, and the engagement materiality / posting threshold separating a GREEN routine entry from a RED sign-off entry. No written policy or no agreed threshold is itself an exception — flag it; never invent a threshold to self-clear an entry into GREEN.

Step 0 — Open the file (always first)

1. qb_session_status then qb_company_info — confirm the right company, live vs SIMULATION, period.
2. qb_account_list — identify every fixed-asset account, its paired accumulated depreciation (contra-asset) account, and the depreciation expense account. Note any asset class booked to the wrong account type.
3. Pull qb_general_ledger for those accounts and qb_trial_balance_export — these are your control balances. Save to the workpaper folder.

Step 1 — Capitalize vs expense (capitalization policy)

• Apply the de minimis safe harbor (Treas. Reg. 1.263(a)-1(f)): expense items at/under the per-item or per-invoice threshold — $2,500/item without an Applicable Financial Statement, $5,000/item with an AFS — only if the client has the written policy in place at the start of the year and elects it annually on the return. Verify current-year thresholds and that the policy exists; the higher limit requires both an AFS and the policy.
• Above the threshold and with a useful life >1 year → capitalize. Include freight, installation, sales tax, and other costs to place the asset in service (capitalized cost, not just invoice price).
• Distinguish repairs/maintenance (expense) from betterments/restorations/adaptations (capitalize) per the tangible property regs (Treas. Reg. 1.263(a)-3). Routine maintenance safe harbor and small-taxpayer safe harbor may apply — verify current-year limits.
• Land is not depreciated; split land from building on a purchase. Leasehold improvements are tangible fixed assets — capitalize and depreciate them over the shorter of useful life or the remaining lease term — distinct from the lease itself (right-of-use asset / lease liability), which falls under ASC 842. Don't equate the two; flag the lease accounting, don't guess.

Step 2 — Maintain the asset register

• For each asset record: ID/tag, description, class, in-service date, capitalized cost, salvage value, method, useful life/recovery period, convention, accumulated depreciation, net book value, location, and disposal status. The register is the authoritative subledger; the GL is the control total.
• New additions → add to the register with full cost detail (Step 1) before any depreciation runs.

Step 3 — Compute book depreciation

• Straight-line: (cost − salvage) ÷ useful life, prorated by convention for the in-service period.
• Declining-balance (e.g. 200%/150% DB): rate × beginning net book value; never depreciate below salvage; switch to straight-line in the year it yields a larger deduction if that's the policy.
• Apply the half-year / mid-month / mid-quarter convention consistently for the first and final periods. Book basis follows the client's GAAP policy and useful lives — not MACRS lives.
• An asset is depreciated only once placed in service (available for use), which can differ from the purchase date.
• Stop depreciating when accumulated depreciation = depreciable base (fully depreciated); keep the asset on the register at NBV (often salvage) until disposed.

Step 4 — Post the monthly depreciation JE

• Standard entry, per asset account or summarized by class:
  • Dr Depreciation Expense / Cr Accumulated Depreciation — amount = the period's computed book depreciation.
• Routine, scheduled, below-threshold monthly depreciation that matches the standing schedule: post via qb_journal_entry_create with dryRun first to prove the entry, then for real, leaving a WORKPAPER note tying the amount to the depreciation schedule. qb_journal_entry_list to confirm it posted; _update/_delete only to correct your own current-period error before sign-off. Use qb_journal_entry_batch_create only for the routine per-class depreciation set, never to bundle a RED entry in with green ones.
• A catch-up / true-up (missed months, method correction, prior-period error) at or above the agreed materiality threshold, or any off-schedule/unusual entry, is RED — prepare, dryRun, and present for sign-off; do not post silently.

Step 5 — Additions

• Confirm the asset hit the fixed-asset account (not expense) at full capitalized cost. If it was expensed in error and is material, prepare a reclass JE (Dr Fixed Asset / Cr the expense) — RED if material. Begin depreciation in the correct in-service period with the right convention.

Step 6 — Disposals, sales & trade-ins

• On disposal, remove the asset: Dr Accumulated Depreciation (its full balance for that asset), Dr Cash/Receivable (proceeds, if any), Cr Fixed Asset (original cost), and Dr Loss or Cr Gain on disposal for the difference. The entry must balance and zero the asset out of both the cost and accumulated-depreciation accounts.
• Depreciate up to the disposal date first (partial-period per convention) before computing gain/loss.
• Gain/loss on disposal is a RED entry — prepare, dryRun, require sign-off. Note that tax gain/ loss differs (different basis, §1245/§1250 recapture, like-kind nuances) — that's a tax-return item, flag it on the tax-vs-book schedule, don't book it to the books.
• Like-kind/trade-in: book the new asset and remove the old; tax deferral under §1031 is now real property only — verify current-year and leave §1031 treatment to the preparer.

Step 7 — Tax-vs-book schedule (for the preparer)

• Maintain a parallel schedule: per asset, book cost/method/life/accum/NBV vs tax basis/MACRS class/convention/§179/bonus/accum. You compute book; you flag tax positions, you don't elect them.
• Note current-year §179 expensing and bonus depreciation as awareness items — both have moving limits and were changed by recent legislation (OBBBA). Verify current-year §179 dollar cap, phase-out threshold, and the bonus depreciation percentage before stating any number; never quote a rate from memory. The §179/bonus election and the resulting M-1/Form 4562 entries are the preparer's call — you supply the schedule.

Step 8 — Reconcile register to GL

• Tie the register's total cost to the GL fixed-asset account(s) and the register's total accumulated depreciation to the contra account(s), per qb_general_ledger. Must tie to the penny.
• Roll-forward each account: beginning + additions − disposals ± reclasses = ending; depreciation expense for the period must equal the JE posted in Step 4.
• Any variance → investigate (un-recorded disposal, asset booked to expense, depreciation posted to the wrong account, manual GL entry bypassing the register). Unexplained variance → EXCEPTIONS QUEUE.

Edge cases a 15-year CPA knows cold

• Accumulated depreciation exceeding cost = over-depreciated (wrong life or double-posted) — investigate.
• Fully-depreciated assets still in use sit at NBV on the register; don't write them off until disposed.
• A debit balance in accumulated depreciation (contra should be a credit) signals a posted-backwards JE.
• Assets sold/scrapped but never removed inflate both cost and accum depreciation — reconcile to find them.
• "Repairs" line that spikes = a capitalizable betterment expensed; scan for items over the cap threshold.
• Constructed/CIP assets don't depreciate until placed in service; watch a stale CIP balance.
• Land lumped with building gets wrongly depreciated; split it.
• Book and tax depreciation diverging is normal (M-1) — they should not be forced to match.
• Bonus/§179 fully expensed an asset for tax while book still depreciates it — that's a deferred-tax timing difference, not an error.

Required output

1. Bottom line (1-2 lines): e.g. "June book depreciation $X posted (Dr Depr Exp / Cr Accum Depr); register ties to GL to the penny; 1 disposal prepared awaiting sign-off; 1 mis-capitalized item in the exceptions queue." State the period and basis (book).
2. Depreciation schedule — per asset/class: cost, method, life, prior accum, current period, ending accum, NBV.
3. Disposal schedule (if any) — asset, proceeds, cost removed, accum removed, gain/loss, Dr/Cr.
4. Register-to-GL reconciliation — cost and accumulated depreciation roll-forwards, GL balance, variance, status (tied / open).
5. Tax-vs-book schedule — per asset book vs tax columns; §179/bonus flags marked "verify current-year".
6. EXCEPTIONS QUEUE — every mis-capitalized item, unrecorded disposal, GL variance, missing-policy flag, or ambiguous asset, each with the question for the partner. Never guessed.
7. WORKPAPER note per posted entry and per recon: what, why, source doc, amount, in-service/disposal date, resulting balance. The GL/TB before and after is the binder's control sheet.

Approval gate

GREEN (autonomous): read, build/maintain the register, apply the capitalization policy, compute depreciation, reconcile, build the tax-vs-book schedule, and post routine, scheduled, below-threshold monthly depreciation that matches the standing schedule (dryRun to prove the entry, then real), workpapers. RED (prepare, dryRun, then require human sign-off before posting): write-downs/ impairments, disposal gain/loss, reclasses or catch-up/true-up entries at or above the agreed materiality threshold, any unusual or off-schedule entry regardless of size, and any §179/bonus election. When materiality is undetermined or the entry is unusual, treat it as RED. Never fabricate a balance, a tax figure, a current-year limit, or a "reconciled" status; never post a RED entry without sign-off.