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andrew-onesound-
April 3, 2024

musical instrument rental question

  • April 3, 2024
  • 2 replies
  • 0 views

I have been using Quickbooks Online Simple Start to manage my music lessons business but now I have a small fleet of about 10 instruments I want to start renting out to students. I don't see the point in an inventory add/on for such a small number but I would like to invoice accurately, track the instruments and charge sales tax. Any recommendations? So far I have just been doing everything manually on Excel but I'd rather be practicing and teaching music than spending time on my computer.

 

Thanks

 

Andrew

    2 replies

    4
    4Gal
    April 4, 2024

    You need to upgrade to QBO Plus ($90/month) to manage your inventories vs switching to QB Desktop 2024 Pro Plus for single user ($650/year).

    Rainflurry
    Rainflurry
    April 4, 2024

    @andrew-onesound- 

     

    You don't need to upgrade because your instruments are not inventory, they are fixed assets.  If you rent the instruments they are fixed assets, inventory is only used if they will be sold.  You can set up a fixed asset account called 'Equipment' and record the cost of the instruments there.  If you can give me some more info on how the instruments were paid for (did you buy them personally or did the business pay for them?) and how long ago, I can guide you further.         

    A
    andrew-onesound-Author
    April 4, 2024

    Thank you! Sure. My business paid for them just recently, a couple weeks ago. I have also a couple that I bought personally years ago for my kids but they've out grown them and so I want to start renting those as well. 

    I obtained a WA state reseller's permit and have a vendor that supplies me the instruments at wholesale prices. 

    I was reading a bit on classifying them as fixed assets but I wasn't sure how to record depreciation because I do not know what rate they depreciate at.

     

    Thanks for the help!

    Rainflurry
    Rainflurry
    April 4, 2024

    @andrew-onesound- 

     

    OK, got it.  Set up a fixed asset account called 'Equipment' or 'Instruments' or something similar.  Then, assign that account to the check/expense/bill you used to record each purchase of the instruments for the business. 

     

    As far as the personal instruments, you can add those to the fixed asset account using a journal entry.  To do that, you will need to know the fair market value (FMV) of the instruments when they were contributed to the business.  Use whatever source you feel is accurate in estimating the FMV.  Then, create the journal entry (New > Journal entry): date the journal entry as of the date the instruments were contribute to the business.  On line 1, enter the newly-created fixed asset account and under the debit column, enter the FMV of the instruments.  On line 2, enter the appropriate equity account (Owner's Capital or Owner's Contributions if a sole proprietorship/single-member LLC, Shareholder Contribution if S-Corp) and under the credit column enter the FMV.  The journal entry adds the FMV to your fixed asset account and increases your equity in the business because you contributed personal property.

     

    As far as recording depreciation, you should really leave that up to your CPA/tax accountant.  You have options. 

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