hi i have been putting small tools through as capital expenditure (tools under say £100) what should they be put under? i cant find anything other than diy tools but they are for the business not diy, obviously things like my mixer, my drills etc are capital expenditure but what about hammers, tape measures etc any help appreciated kind regards nicky
You can create new P&l category for Small Tools
How do i do that please
[Reports] Chart of Nominal Accounts
Good practice seems to be to set and document a rule for the business of what value a small tool falls under (less than £100 say…) I then set up a new nominal - Adding a new nominal account to track that spend.
From Wikipedia " Capital expenditure or capital expense (capex or CAPEX ) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof."
Therefore small tools ARE CAPEX
ok but what if, on a job the other day i bought wire brushes they were purchased for a low price on the basis they would only last that one job then be thrown in the bin, i have accounted for them as a general purchase should they of been capex? kind regards nicky
Depends if you are maintaining your own asset or another companies…
This is to complete a repair to a roof i own a roofing company so the tool was used with one use for a job then binned
5002 Miscellaneous Purchases will do for small tools under £500
Hi Nicky this is one of those areas that you can do what suits you really. I run a small property business and buy lots of small tools and bibs and bobs and this is my solution. I do not depreciate anything unless its over £1,000 and then only for 3 years. This is not an accountants view but mine as depreciation is now no longer an allowable expense for Corp Tax and the cash goes out of the business anyway. So small tools and equipment to do our work. There are 2 locations in the P & L report that you can use and to me they are a cost of doing business ie a direct cost (QFile calls them Direct Expense) not an overhead expense or variable cost. So in the Chart of Accounts for me its an account in range 6000 to 6999 and I call it Small tools and equipment. When adding a new account I always use the Enter Specific Code option and allocate a Code (its called a nominal code but you don’t need to know that just that the number range puts it in a section of the P&L report) rather than Enter by Type which I agree is confusing. I always allow 5 numbers between each code I use just in case I want to slip something in later between the codes allocated. So find your code number in the 6000 and add a Description that you like and Save. The other location is in Purchases but its a bit iffy in my opinion and does not help me run my business. Remember the P&L report is for your management purposes all year and you should use it and the Codes and sections to give you the best visibility of how you are spending your cash and the cost for each project for a project P&L (a whole new question if you have not tried that yet ). Your accountant will take whatever you do and reallocate what he does not like for Corp Tax purposes in your Year End anyway. Also don’t worry about deleting accounts you don’t use (the ones with red X’s) to clean up your Chart of Accounts it gives you more numbers and you can reinstate anything you want later. Hope this helps and good luck. No stigma about being self taught.
Properties are a tricky business, depending if it is developers or investors, lots of expenses can end up as revenue or capital regardless the amounts
Agreed but we are on the shovel and need our QF to tell us what we are spending our cash on. We leave it to you brains to sort us out at YE.
In which case it’s not capital. A good rule of thumb is that a capital (fixed) asset is something you expect to retain for use in the business for at least one year, more likely two years or more. Something that is only ever going to be used on one job is a cost of sale (purchases) not a fixed asset.
Added to that, it’s not really worth capitalising small value items anyway - depending on what they are and the size of the business, I usually don’t capitalise anything under a couple of hundred quid anyway, unless it’s IT equipment. The depreciation may not be allowable, but you generally get the tax deduction these days in full anyway, as part of the Annual Investment Allowance.
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