Hi I have ordered a new ipad to be used exclusively for my business with 4g data plan.
£300 up front and then monthly fee for 4g data.
How should I enter this in QF, what category?
Not sure if it is an asset as EE owns the ipad until the first 6 months are up
Cheers in advance
To truly reflect what’s happening here in your accounts you’d probably need to make some periodic adjustments. Although it’s likely these adjustments would end up being overly complicated given the amounts involved.
The initial £300 could be booked to an asset code like “Office Equipment”, the remaining book value for the iPad (let’s say £300) would then need to be set against a loan account. As you make your monthly payments to the network provider you’d want to allocate a portion of these payments to repay the loan aspect (£300 / 24 months - assuming 24 month contract) and the remaining amount to something like “Telecoms charges”.
Personally I think the above is a little overkill and would just allocate the first lot of monthly payments to “office equipment” (balance sheet) and anything thereafter to “telecoms charges” (P&L).
This is no different to any other mobile phone contract, fee upfront and then a loan of sorts for 24 months mixed with a phone contract fee.
Great thanks for your replies. So if I allocate to office equipment it then becomes an asset?
Yes that’s correct, Office Equipment is an asset code so it will sit on your balance sheet.
Does this then fall in value each year?
I have managed to avoid having assets for my business the last 3 years!
Yes it would depreciate in value. Typically you would post some year end journals to write down the value. There’s an example posted here that you could adapt for office equipment.
That’s how you need to account for it, but it doesn’t happen automatically. You have to decide for each asset how you want to depreciate it and enter the appropriate journals. For straight-line depreciation (something that loses its value gradually over its useful life) you can use recurring journals, but for reducing balance (lose e.g. half the value in year 1, then half of what’s left in year 2, etc.) you’ll have to calculate it by hand.
But also bear in mind that depreciation in your books is separate from how you account for the asset for tax purposes - you’d be able to claim the whole £300 as tax-deductible in year 1, either under the “annual investment allowance” or simply as a purchase if you’re a sole trader using cash basis for your income tax.
Similiar query but I had no upfront cost for my ipad. 24 month plan, ipad with data.
How do I record this? Category hosting?