Assets - The Book-keepers Forum (UK)

Rhianrach · Expert

Assets

attilabenko · Guru

Hi Steve,

I would think if the scales are to use by the company (and not for resale) they would go to shop(office) equipment I seem to remember somewhere in the 0030s in sage (fixed assets)...and if this is the case the setup charge would easily fit in the shop(office) equipment maintanance somewhere around 7700 in sage.
I think 7000s are overheads so you shouldn,t put the original purchase of scales there but not at work can,t check it...
( I am not sure so if anyone is, please correct me)

Attila

semsley · Guru

Atilla is correct, the scales are fixtures and fittings the setting up of them maintenance which comes under overheads in the 7000 range.

Rhianrach · Expert

Awesome thanks for the replies, I queried it because I have seen discussions on here where low valued assets haven't been worth putting as fixed assets.

I shall put the scales in 0020.

Thanks again

Susie Sue · Senior Member

I think it depends on their accountant! I worked for one company that anything under £1000 went to overheads but at another company the limit was £500.

Who knows??! confuse

Davey · Veteran Member

Following on to what susie says I think it depends upon the size of the business
whether to charge it as an expenses or Fixed Asset. A Large company
may write if off where as a smaller business with a much lower Turnover
charge it as a fixed asset. Hence the reason why anything under £ 1000 and
anothers limit was £ 500. was stated above.

Rhianrach · Expert

It's a smalll company so I'll put it as a fixed asset. smile

If the accountant needs to change it then thats fine. I think at some point you just have to make a decision. wink

Wella · Expert

Hi Steve

I know Shaun gave a neat little table of how to calculate whether an item can be classed as an expense, which basically depends an a few factors related to various financial values (can't find the post at the moment).

If I understand correctly an asset can also be valued with all costs incurred to get it into a serviceable condition so in theory the set up charge could be added to the basic cost of the scales to give a book value for the asset.

I think in your case you are correct

Bill

Rhianrach · Expert

Wella wrote:

Hi Steve

I know Shaun gave a neat little table of how to calculate whether an item can be classed as an expense, which basically depends an a few factors related to various financial values (can't find the post at the moment).

If I understand correctly an asset can also be valued with all costs incurred to get it into a serviceable condition so in theory the set up charge could be added to the basic cost of the scales to give a book value for the asset.

I think in your case you are correct

Bill

Hi Bill

If you don't mind me asking at which point was I correct as I appear to of changed my mind from my original post (i'm a very indecisive person I think), should it be a fixed asset including setup or in the expenses including setup in your view.

And yes I seem to remember a post by Shaun all about this but as ever I can't find it grrrrr. evileye

Wella · Expert

Hi Steve

I was refering to your last post, treat it as an asset.

I personally would include the setup fee as part of the cost of asset. The set up fee is almost 25% on top of the asset and without it being set up/ commisioned it isnt useable.

Like I said, this is what I would do but others may treat it differently.

Bill

I used to be indecisive, now I'm not so sure

-- Edited by Wella on Friday 30th of April 2010 11:02:10 AM

Rhianrach · Expert

Wella wrote:

Hi Steve

I was refering to your last post, treat it as an asset.

I personally would include the setup fee as part of the cost of asset. The set up fee is almost 25% on top of the asset and without it being set up/ commisioned it isnt useable.

Like I said, this is what I would do but others may treat it differently.

Bill

I used to be indecisive, now I'm not so sure

-- Edited by Wella on Friday 30th of April 2010 11:02:10 AM

Thanks.

Not sure whether indecisiveness is a good thing or a bad thing.

Wella · Expert

It's bad, er no, it's good, mmm, no it's bad, isn't it? Can't decide

littlebookkeeper · Senior Member

Hi,

I would also include a set up fee for the scales as the cost of the asset as Bill said as you can't use the scales until they are set up. Of course this does not include an annual maintenance charge.

Carole

Shamus · Forum Moderator & Expert

Hi People,

Sorry, been off doing stuff and just catching up with my fan mail!

I can't find that post either Bill but I know which one you mean.

basically, the cost of an asset is everything included in bringing it to it's current state and location in order for it to be brought into service (Sea trials are part of the initial cost of a naval frigate even though the asset is to all intent and purpose complete before the sea trials).

A setup fee can be a difficult one as if it's a one off such as seems to be the example here then it is part of the cost of the asset.

Conversely, if this was say a machine to make windows and had to be set up for each batch of work then the initial setup would only be the first setting of a machine rather than a requirement of bringing it into service therefore it's an expense.

Note that there is a certain amount of leeway as to how expenses such as this may be treated but if the initial setup costs are not capitalised then such must be done consistently across all assets of the same type.

This is all covered under FRS15 Tangible Fixed Assets (you've got me started now Carole!).

semsley · Guru

I'm not sure about a one off set up. Presumably this is something to do with calibration, and don't scales have to be calibrated regularly?

Wella · Expert

Hi Sheila

I agree, if it was a calibration that needed doing regularly then I would class it as maintenance. I read it that it was more of a commisioning for first use and bringing the scales into service.

The problem with having over a 1000 post Shaun, is finding one when you need it.
I trawled a few pages of your posts and tried the search function but no luck.
Perhaps, if you have time, you could repeat the %ages etc

Another tricky asset valuation consideration, is reporation. Say a building is erected and a conditions of planning say that it can only stand for X years, then the land has to be returned to its original condition. Then the cost of putting it back to its original state should be added to the asset value.

Bill

-- Edited by Wella on Friday 30th of April 2010 05:48:38 PM

Rhianrach · Expert

The setup fee is plugging it in and networking the scales (part of being a member of the Q guild is a massively efficient system that amongst other things records everything you do) and of course calibration, if you sold this particular set of scales then i'm reasonably certain you would need to get someone to set it up so im reasonably certain you would need to get someone in to do it and they would charge so maybe your all right and it's an integral cost of the machine itself.

attilabenko · Guru

Interesting discussion.
I know one could include these setup fees in the purchase but what happens if you let,s say change your mind (maybe you wanted blue scales not polished steel because it goes well with the decor) send the scales back to the company, they are really nice, exchange it for you but obviously they don,t want to refund the setup fee and they even charge you another setup fee.
Does it mean(?) the scales worth 650 brand new will be on your books for twice the setup (300) + 650=950? Surely it does not worth 950?
And what happens with depreciation if you integrate all these in the price of asset? Would it mean on your books the scales would worth the same price you actually paid for them(650) after two years or so?
950-some depreciation over two years=650?

I should not be reading this forum, it is confusing me in things i already knew ( i thought i did)

Attila

Shamus · Forum Moderator & Expert

Hi Attila,

Ahh, your using common sense. A common mistake there when it comes to accounting!

The amount capitalised through the books is the value to the company recorded on an historical cost basis.

The item is then depreciated as accurately as possible over it's estimated useful economic life to a future residual value that the item should be able to be exchanged in an arms length transaction.

For most of an assets life it will generally be held in the books at a value greater than that which is could be sold for.

If there is any query over a companies future then one changes from valuation on a depreciated historical cost basis to the amount that an asset might reasonably be expected to sell for in the open market... Sometimes this is referred to as the fire sale value.

This is all covered in probably the most important of the financial reporting standards FRS15 Tangible fixed assets.

In the above example if the Asset cost £650 but in order to bring it to position and condition for use cost a further £300 in commissioning costs then providing that policy was followed for all assets of the same class then the amount capitalised in the books would indeed be £950.

And yes, the depreciation is on the full capitalised amount, not just on the base cost.

We're getting now into the dark art of accountancy rather than bookkeeping. From reading your past posts Attila I think that you would really enjoy doing ACCA if ever you took a fancy to going down that route.

There are a lot of rules around this area where some assets for example an aeroplane need to be depreciated as seperate components. (Engines having a shorter life expectancy than the plane as a whole).

Talk in a while,

Shaun.

attilabenko · Guru

Hi Shaun,

I did think using common sense is going to be a mistake...and I am sure I would enjoy accounting. I would enjoy the studies more than the actual work. Like to keep my brain working...

Hope you are enjoying the bank holiday weekend.

Attila

Shamus · Forum Moderator & Expert

Hi Attila,

I think that accounting is one of those area that's so diverse that there are elements of it that all of us either love or hate.

A mistake often made is the assumption that accountancy is all about accounts and tax returns which for the most part I would actually place closer to the bookkeepers role especially where the bookkeeper took the AAT route.

I started down the accountancy path as banking is one of the recognised areas of accountancy and so I had existing skills to build on.

I quite enjoy performance management, business analysis and anything to do with corporate law but other area's like group cash flow statements leave me cold. however I appreciate that to get the letters one has to cover the full spectrum, not just the bits that you like.

So far the weekends been a lot of playing with Powerpoint for a presentation that I'm doing of Tuesday. Fingers crossed that will be finished today though so the rest of the weekend is free.

Hows your weekend going Attila?