Fixed Assets
Track capital assets, their cost and accumulated depreciation. Post depreciation by straight-line, MACRS (with optional bonus or §179) or a custom schedule.
A fixed asset is something that serves the business for years, such as a vehicle, machinery or a building. Its cost goes on the balance sheet and moves to expense gradually as depreciation, matching the cost to the years that use it.
Recording an asset
- Record the purchase, then add the asset from it
Record the purchase like any transaction: categorize the payment or bill to the fixed-asset account, or post a journal entry (for a loan-financed or owner-contributed asset). Then add the asset with Entries in Lejr and pick those entries; its cost is their total. Cost includes everything to get it working, such as delivery and installation. An asset from your opening balances uses Opening balance instead.
- Set the in-service date
The date it was ready to use, not the purchase date. Depreciation starts from it.
- Choose a method
Straight-line charges an equal amount each period. MACRS, the method US tax returns generally use, front-loads the deduction with 200% or 150% declining balance (or straight-line) under a half-year, mid-quarter or mid-month convention. Lejr uses the IRS percentage tables where they publish the row and the same formula otherwise. Custom takes each period's amount as you enter it. Land isn't depreciated.
- Set the recovery period
Straight-line takes any life, including fractions: 27.5 years is 330 months. MACRS takes the recovery period the IRS assigns the property, with its method and convention. Your preparer or IRS Publication 946 says which.
- Post depreciation
Each period's charge debits depreciation expense and credits accumulated depreciation. Post it yourself, or set the asset's Posting to Automatically.
Where the entry lands
Depreciation never touches cash. It credits accumulated depreciation, a contra-asset that sits under the asset and reduces it. Cost stays visible, and cost minus accumulated depreciation is book value.
Book versus tax depreciation
Straight-line often reflects how equipment actually wears. MACRS usually gives a larger deduction sooner. Many businesses keep one for management reports and the other for the return. Decide with your accountant; Lejr doesn't choose for you.
Disposal
Dispose closes out a sold or scrapped asset. It removes the cost and accumulated depreciation and records a gain or loss: what you received minus book value. An asset left on the books after it's gone overstates your assets.
The entries behind an asset
An asset's Purchase section lists the entries that make up its cost. One payment can buy several assets (a $9,000 wire for three containers): each takes its share, and anything unassigned stays on the account, shown in its balance breakdown. One asset can be paid by several entries, such as a deposit and the balance on delivery.
A deposit paid before delivery goes to an account like Deposits on equipment. When the asset arrives, a journal entry moves it to the fixed-asset account, and the asset links that entry and the final payment.
Changing the entries changes the cost. If depreciation has posted, Lejr lists each depreciation entry the new cost affects and asks before reversing and reposting each on its own date. A change that reaches a closed period is refused; reopen the period or record the difference with a journal entry.
Trading in an old asset
Dispose of the old asset as traded in, with the trade-in allowance as proceeds to a clearing account.
Post a journal entry for the new purchase: debit the new asset's account for the full price, credit the bank for the cash paid, and credit the clearing account for the allowance.
Add the new asset with Entries in Lejr from that entry. Or ask the assistant to do the trade-in.
Unwinding an asset
Unwind is for an asset that shouldn't exist, because the order fell through or it was set up wrong. Lejr reverses its depreciation, each entry in its own month, and releases its entries. The purchase stays on the books, unassigned, ready to link to another asset or recategorize.
Good to know
- MACRS counts tax years, which start in the month set in Settings → Accounting → Fiscal year → Tax year (January by default). This is separate from your fiscal year; most sole proprietors, partnerships and S corporations file on a calendar year.
- A MACRS asset can take a first-year write-off (bonus depreciation or §179) before its regular schedule; the remaining basis depreciates as usual. Whether property qualifies is your preparer's call. Straight-line, custom and land assets can't take one.
- Each period is rounded on the running total, so each year adds up to its exact share to the cent.
- MACRS straight-line with the mid-month convention (real property, 27.5 or 39 years) takes half a month in the first month and the other half after the recovery period. Book straight-line has no mid-month convention: whole months from the in-service month.
- Lejr builds schedules and posts entries. It doesn't file anything or give tax advice.
- Small purchases don't need capitalizing. Ask your accountant what threshold to use.
Common questions
- I already categorized the purchase as an expense. How do I make it an asset?
- Change its category to the asset account on the Transactions page. Then add the asset with Entries in Lejr: Match transactions lists payments still in Review and payments on the asset account, never ones booked to an expense.
- What if I sell an asset for more than its book value?
- The difference is a gain, recorded when you dispose of it.