Fixed Asset Recognition

by Gilly
(India)

Hi Madam,

I have some practical questions in relation to fixed assets.

1. Our company paid 50 % of total cost of sign board. In Jan 2010, we received the invoice for what we paid. Once the actual job was completed, we received an invoice for balance in Mar 2010. The remaining 50% balance was paid in Mar 2010.

I want to know what is the date I recognize the sign board as a fixed asset. Is it in Jan 2010 or in Mar 2010?

2. Our company has taken a new office for rent. We have fixed glass for the office counter for $2500 USD and paid for vertical blinds for $1000 USD as part of our renovation expenses.

Do I want to recognize both as fixed assets or do I just want to write them off as an expense?

3. Telephone, data network setup charges and telephone device charges, are expensed or capitalized?


Questions no. 2 and 3 I think should be expensed not capitalized, but the amount paid for such has a material impact in income statement so I'm not sure on my judgement.

If your answer is to recognise as an expense, please let me know is it possible to show only part of expense in the monthly income statement? What is the proper accounting treatment?

Thank you.

Wow Gilly, you have a lot of questions there.

1. If you are doing accrual accounting, you record your transactions at the date the transaction occurred. So you would book an entry in January for the down payment and the remainder in March when you receive the invoice for the remaining balance.

If the amount is significant, you may want to consider accruing the remaining 50% in January when you record the deposit. You would then reverse the accrual in March when you book the actual invoice.

You may also want to read the forum post How to Record Vender Prepayments for other options.

2. Check out the forum post on how to record leasehold improvements in Bookkeeping for Small Restaurant.

3. Check out CRA's CCA classification on how to classify your phone and data network charges. Class 8 may be a fit for your items.

The fact that these items are listed in the CCA list should suggest to you that they should probably be capitalized and not expensed.






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