We were recently approached by a dentist who bought a used CEREC and put it on a newly opened rewards credit card at 0% for 12 months. They were planning on paying $2,000 -3,000 per month and do a balloon payment at the end, but weren’t sure how to enter it into QuickBooks. He admitted that while his balance sheet is far from perfect, he tried to ensure his reporting was at least accurate. He did not want to enter a $45,000 laboratory charge as it would screw up his reporting and be inaccurate from an accounting perspective. He wanted the monthly payments to be classified as Lab Expenses, but wasn’t sure exactly what to do.
- Should he create a lab subaccount with a negative balance, and make payments to it?
- Should he create a fixed asset, long term liability account, and do it this way? This method would make the payments will not show up on the P&L.
- Should he make payments without a corresponding asset account, as if it were an outside vendor?
Bassim Michael, CPA advised first and foremost to make sure that his QuickBooks file is in-sync with his Accountant’s copy. Otherwise all the work being done is not helping in getting accurate and informative reports to help the practice be managed and its overhead expenses. This will save time and money so that the accountant doesn’t need to make adjustments on his file every time it’s sent to be reviewed.
Secondly, CEREC should be set up as an asset and offset by a LT liability for the balance owed. As far as expensing the machine, that will occur by depreciating it. The dentist should keep track of the payments going out to pay off the balance, then they need a statement of cash flows.
It is important for the dentist to talk with his dental CPA about the possibility of claiming the Domestic Production Activities Deduction. This deduction can be claimed for using the CEREC machine to manufacture crowns. If you have any questions about a similar situation, please don’t hesitate to contact our Dental CPAs.