I have some low cost tools, £20, £14 etc, which are absolutely crucial to my business.
I’ve been recording things like this as plant & machinery, but I have a couple of questions.
Should I move these to a category where they aren’t classed as assets? I’m not sure these are exactly recoverable, you wouldn’t make much off selling them
If not, should I create a category that makes it a bit more clear that these are tools, not plant or machinery. They’re little tester devices for the most part.
Usually it’s advisable to set a limit (e.g. £100 to £150) and expense any tools below that threshold. That would reduce your profit on the P&L. Anything over this limit that you expect to get a few years life from post to an asset code (e.g. plant and machinery, or some custom asset code).
Most businesses can expense these things to one of the pre-existing codes e.g. repairs and renewals. If it’s more fundamental to your business (i.e. in construction related businesses) you can create a custom nominal code and expense all these tools to that code.