As has been said, whether or not to capitalise an asset can vary from business to business. Technically, I suppose, its anything with a lifespan of more than 1 year. But then there are items which are too trivial, a stapler is always the example. Most of the businesses I work with it's anything lasting longer than 1 year and costing more that £100. Bigger businesses may say anything over £300.
Kris
From the items outlined it looks like a small business. I have put in bold what I would capitalise.
cement mixer 280 paddle mixer for cement 130 various small tools and trowels 60 spades x4 60 drills x4 with various appliences 200 rake x2 27 water hose 32 screwdrivers 60 electric extension leads /reels x3 75 power hammer 185 plastering tools 95 painting brushes and rollers 85 exterior paint sprayer 227 ladders x3 520 halogen lights x3 63 scaffolding 860 various external and internal paints 140 various tiles wall and floor 220 radiators various sizes 435 electrical wire various -x6 drums 290 electical meeter 22 electical safety test kit 16 large sander incl various additional pieces 180 (depending on additional pieces) small hand held sander 18 insulation celotex 50mm x12 sheets 336 dump proofing treatment 38 roof tiles 200 led flashing aprox 9m various width 285 bath taps 180 kitchen sink 99 extractor fan 120 various door handles and fixtures 45
Are most of those items listed for the purpose of renovating a single property?
£100 sounds fine to me, dependant upon the size of the business as you pointed out Kris, i must just be thinking bigger business at the moment (studying consolidated accounts) lol.
-- Edited by Spamkebab on Friday 16th of March 2012 11:43:09 AM
I have just started to do the books for my new client. She has got some small tools bought of the value of £6500 (including office equipment, building tools such as drills, screwdrivers)
cement mixer 280 paddle mixer for cement 130 various small tools and trowels 60 spades x4 60 drills x4 with various appliences 200 rake x2 27 water hose 32 screwdrivers 60 electric extension leads /reels x3 75 power hammer 185 plastering tools 95 painting brushes and rollers 85 exterior paint sprayer 227 ladders x3 520 halogen lights x3 63 scaffolding 860 various external and internal paints 140 various tiles wall and floor 220 radiators various sizes 435 electrical wire various -x6 drums 290 electical meeter 22 electical safety test kit 16 large sander incl various additional pieces 180 small hand held sander 18 insulation celotex 50mm x12 sheets 336 dump proofing treatment 38 roof tiles 200 led flashing aprox 9m various width 285 bath taps 180 kitchen sink 99 extractor fan 120 various door handles and fixtures 45
Looking through the list roughly and not thinking in detail you can clearly see that things like the cement mixer, computer, desk etc can be capitalised but other items such as the stationery and brushes are expenses. The majority of it looks like capital but you would need to go through the list properly but any problems with items your not sure of just let us know in here
The only items i would consider capitalising are the desk, computer, scaffolding and cement mixer (possibly the chair). The rest are expenses, things like radiators are to either improve the property which will help to increase property value or held for sale. The printer at that price is a throw away item once the ink has run out. You should work out a fixed figure for capitalising fixed assets, something like anything above £300. Most of that list looks like stuff for property maintenance though, used like i said, to upgrade the property and the benfits will be realised hopefully through revaluation.
I'm probably way off here, still learning i'm afraid, but that is what i see from that list.
I have the same situation where I am not sure what to capitalise. What if furniture, for example drawer cabinet, is costing less than £100, say £40, don't we need to capitalise as it is because less than 100 pounds, but it can stand for ages. And tools like hammer drill, drill they have to be checked every 3 months in construction sites as they are used every day for 8 hours, they quickly loose their lives. Do we need to capitalise it is because they cost between £150 - £300. Cannot understand how to treat these purchases fairly.
I have the same situation where I am not sure what to capitalise. What if furniture, for example drawer cabinet, is costing less than £100, say £40, don't we need to capitalise as it is because less than 100 pounds, but it can stand for ages. And tools like hammer drill, drill they have to be checked every 3 months in construction sites as they are used every day for 8 hours, they quickly loose their lives. Do we need to capitalise it is because they cost between £150 - £300. Cannot understand how to treat these purchases fairly.
No, items should last more than 1 year to be capitalised. But do you really want to have a blanace sheet full of staplers, punches and wastepaper bins? Probably not, so we tend to expense smaller items regardless of lifespan.
The value is down to you to decide really (within reason), but I would suggest if you are likely to replace the item in 3 month, even if it cost £1000 its not a capital item.
You'd be surprised at how confused some people get about owners and directors. Have a look at some past post if you don't believe me. I recently took over a sole trader from another bookkeeper and found a DLA in the trial balance.
i think they call themselfs a director and use this one in the books. all messed up.
I have got one of my clients who runs business as limited and his previous accountant was claiming everything (including all diesel from his private car, all private mobile bills, internet based at home) not milage allowance. more over thay are Chartered Accountants.
as far as i know it is not allowable. is that correct?
If this is a small business I would think about having a rule not to capitalise anything under £100, and also you need to ask the question whether these items are being bought for the use of the business or just as items for building or renovating other properties the company is working on as that changes everything as you would not then even include in the fixed asset register.
Its whether the tools would be considered material either individually OR in agregate.
Also, some of the items are not tools but rather materials.
My take after a very quick scan would be :
Capitalise individually (depends on materialarity level of the business as to whether some of these should fall into the next category of capitalise in agregate)
cement mixer 280
computer 450
desk 360
exterior paint sprayer 227
ladders x3 520
large sander incl various additional pieces 180 (depending on additional pieces)
paddle mixer for cement 130
power hammer 185
scaffolding 860
Capitalise in agregate or expense Note that the whole lot for this category are bundled here but you would break it down into several sub categories, i.e. tools, office furnishings, etc.
drills x4 with various appliences 200
electical meeter 22
electical safety test kit 16
electric extension leads /reels x3 75
electrical wire various -x6 drums 290
office chair 140
painting brushes and rollers 85
plastering tools 95
printer/scaner/fax 75
rake x2 27
screwdrivers 60
small hand held sander 18
spades x4 60
various small tools and trowels 60
water hose 32
Materials (Do not capitalise)
bath taps 180
dump proofing treatment 38
extractor fan 120
halogen lights x3 63
insulation celotex 50mm x12 sheets 336
kitchen sink 99
led flashing aprox 9m various width 285
radiators various sizes 435
roof tiles 200
various door handles and fixtures 45
various external and internal paints 140
various tiles wall and floor 220
Expense :
vaious filing and office stationery 55
Sure that as I've just done this quickly one or two of the items are in a different category to if I had thought about it a little more.
Right, back to other peoples take on this.
Talk later,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I had gone through the post, The expenses are different from each company and person also. Many of them are spending the money on purchasing the office goods, computers etc., Man of them are saving the money.
