Hi, My client is a small sole trader. He has a desktop PC for home use but has recently been given a laptop which he intends to use for business use only. Its 2 years old and he had to pay a £40 repair bill on it when he got it.
I was going to introduce the laptop as an asset with net book value of £100 so the entries would be Cr Capital, Dr Fixed asset (laptop) and enter the repair bill as an expense so Cr Bank, Dr repairs.
Or is it best not to introduce it as an asset due to the low value? But then I didnt think I could charge for expenses such as repairs on an item that hasnt been introduced as belonging to the business?
Also if it is introduced as an asset, is it acceptable to depreciate at £50 per year as he is expecting 2 years use out of it before purchasing a new one?
Sorry - Lots of questions in one there!! Could anyone advise me on the best thing to do and verify my postings?
Depending on the size of the business a fixed asset of £100 is perfectly acceptable. Your entries are fine. I would normally conciser depreciating computers fully in one year as things can move on so quickly with technology.
