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bquinnelmore-gma
September 20, 2022
Solved

How do I move the reporting of my depreciation journal entries from the Cash Flow from Investing to the Cash flow from Operating activities in Statement of Cash Flows?

  • September 20, 2022
  • 2 replies
  • 0 views
I have a real estate business set up in Quickbooks online and am depreciating two rental properties using monthly journal entries that credit the asset building account and debit the depreciation expense account. When I reviewed the Standard Report, Statements of Cash Flows, the Depreciation showed up in the Cash Flow from Investing Activities section. Every accounting/finance reference I found mentions that depreciation should be in the Cash Flow from Operating Activities so I’m wondering 1) if my references are correct and 2) how do I update my journal entries or even chart of accounts to ensure the depreciation appears in the Cash Flow from Operating activities section of the Statement of Cash Flows?
Best answer by Rainflurry

@bquinnelmore-gma 

 

I think this is just a limitation of QBO reporting.  Most business entities would classify the non-cash depreciation expense on the cash flow statement as an investing activity but, because your business is real estate, it should be classified as operations as you alluded to.  Unfortunately, it can't be reclassified to operations in QBO. 

2 replies

Rustler
Rustler
September 21, 2022

I can not answer the cash flow reporting question since I do not believe that a paper expense belongs in a cash flow report.

 

But as I understand it, depreciation should post to its own account. My understanding is that the cost of the asset is not changed once it is booked. I usually set it up something like this
Fixed Assets
>> Asset name or address
>> >> asset cost
>> >> accum. depreciation asset

Rainflurry
RainflurryAnswer
September 21, 2022

@bquinnelmore-gma 

 

I think this is just a limitation of QBO reporting.  Most business entities would classify the non-cash depreciation expense on the cash flow statement as an investing activity but, because your business is real estate, it should be classified as operations as you alluded to.  Unfortunately, it can't be reclassified to operations in QBO. 

B
bquinnelmore-gmaAuthor
September 21, 2022

Thanks for the explanation! The ultimate goal is to generate a clear monthly cash flow view to assess the rental performance at each property itself. By customizing the Statement of Cash Flows to display columns by Months, it worked perfectly. 

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