Do I Credit Depreciation When Depreciating Real Estate?

When you depreciate a fixed asset, you do not need to change the original cost of the asset. Instead, you record the depreciation using a journal entry that spreads the cost over the asset’s useful life.

Here is how to handle this in QuickBooks Online:

1. Set up a Depreciation Expense account

If you don’t already have an account to track depreciation, create one:

1. Select the Settings gear icon.
2. Select Chart of Accounts.
3. Select New.
4. Under Account Type, select Expenses.
5. Under Detail Type, select Depreciation.
6. Give the account a name (for example, Depreciation Expense).
7. Select Save and close.

2. Create a Journal Entry

Once you or your accountant has calculated the depreciation amount, record it with a journal entry:

1. Select the Settings gear icon.
2. Select Journal Entry.
3. On the first line:
   • Account: Select the Depreciation Expense account you set up (or the one your accountant uses).
   • Debit: Enter the depreciation amount.
4. On the second line:
   • Account: Select the specific Fixed Asset account (or the accumulated depreciation subaccount if your accountant uses one).
   • Credit: Enter the same depreciation amount.
5. Select Save and close.

This process records the expense for the period and reduces the book value of the asset without altering the original purchase cost.