The company bought a mobile phone in 2021, the cost of which was entered as Office Equipment as a fixed asset. It was depreciated a year later and again this year. However it is now faulty and is beyond economic repair and will be replaced with one of similar value. I assume the old phone should be written off as zero value and its replacement be entered as a new item of Office Equipment. Is the write off value of the old phone an expense? If so how should that expense be handled?
I have read elsewhere that mobile phones shouldn’t really be classed as a fixed asset anyway, and should rather be treated as an Overhead. The value is less than £300.00 so perhaps the new one could be treated as such.
Hi @MartynB - I’m not an accountant but a small business owner.
I think whether something is a fixed asset or simply an in year expense is for the business to decide and it may be that the threshold is different for smaller businesses than larger businesses. That said, when I worked in large public sector bodies, it was more about category than value; all our mobile devices had asset tracking stickers and had to be accounted for. I believe the cost category would be something “loss on disposal of fixed asset”; where that sits in the chart of accounts I’m not 100% sure, but if you search for that term, you may find more knowledgeable sources.
Hi @MartynB, The situation that you describe of a mobile phone “office equipment” that requires “derecognition of the asset” is something that I arrange by doing a journal entry “Year End Assets Schedule” prior to running the QF auto-close journal “Year End Closing Journal”.
However for smaller items such as mobile phones no derecognition is done. I do derecognition for motor vehicles which involves returning the asset back to zero in the two nominal ledgers used for recording the purchase “(0050) Motor Vehicles” and then the subsequent depreciation “(0051) Motor Vehicles Depreciation” with a third journal line to balance those two ledger entries to the money received for the sale “(4200) Sales of Assets”. Not an easy process to comprehend and took me some time to initally get the process under way, but if you have a sales invoice that was a “Sale of Assets” such item would require derecognising, still an area of work that is more problematic and look forward to when QF have implemented the proposed Fixed assets schedule