We are a small scale, recently launched cider maker and looking to borrow from the bank.
I understand the basics of whats the difference between assets and expenses, but where do I draw the line?
My apple press, conveyor belts, 48 barrels, warehouse racking, fermenting vessels, delivery van etc I list as assets. The apples we buy and press as an expense and the cider it produces as stock.
But where do I draw the line on assets. We own 48 different pre used, maturation wooden sized barrels, (these barrels are re used every year for maturing the cider not packaging for delivery) that have an average cost of approximately £60 each, so as a collective, for us this is an expensive and essential piece of ‘plant / equipment’ for production.
But what about the barrel bungs? I turned my own barrel bungs on the lathe from a £30 piece of of poplar we purchased. Would I include the bungs as assets or an expense? They will last as long as the barrels and are an integral part of the barrel.
Or what I am driving at, is creating to many assets a problem further down the line when working out depreciation etc?
But remember I want my accounts to reflect the true value/ worth of my business.
Is this where I should be introducing a Capitalisation Threshold? And If I use one should this threshold be an amount that is reflective to the worth of my business / accounts or a threshold where it is not worth the accountants time working out depreciation ratios etc?
An example would be, I spent nearly £400 on a stainless steel food grade pump which is used for only a few weeks of the year, this is a significant expenditure compared to other day to day running expenditure. So should my Cap limit be £250 as that is quite a big expenditure for us, or simply £1000 - £5000 regardless of what our turnover is now or in the future.
I suppose the crux for me is expenses look expensive and assets make my business look positive, especially taking into account we work on a yearly production cycle coupled with seasonal sales and are currently looking to borrow from the bank.
thank you. sorry if this got a bit long.