How do you record depreciation or asset tracking for fixed assets in QuickBooks Online?

• A. Use a Fixed Asset account for the asset; record depreciation via a journal entry or use an asset depreciation workflow if available.
• B. Record depreciation as a routine expense each month.
• C. Use an Income account to track depreciation.
• D. Do not track depreciation; it must be handled outside QuickBooks.

Answer: (A)

In QuickBooks Online, you manage fixed assets by using a Fixed Asset account and reflect their wear over time with depreciation that pairs an expense with a contra-asset. The best practice is to record depreciation by debiting a Depreciation Expense and crediting an Accumulated Depreciation (a contra-asset) account, tied to the asset’s Fixed Asset record. If your version supports it, you can use the built-in asset depreciation workflow to automate this; otherwise a journal entry achieves the same effect. This keeps the asset’s net book value (cost minus accumulated depreciation) on the balance sheet updated each period, while showing depreciation expense on the income statement.

Recording depreciation as a routine expense, without crediting accumulated depreciation, would not reduce the asset’s carrying amount and would misstate the balance sheet. Using an Income account to track depreciation misclassifies the transaction as revenue. And not tracking depreciation at all leaves the asset’s value overstated and the financial statements inaccurate.