My client bought a laptop 5 years ago with accidental cover. This was recorded as a fixed asset and depreciated over the past 4 years and the payment relating to the cover recorded as prepayment and released over the years.
Now the question is that in year 5, the laptop broke down and it cannot be fixed. Therefore as the insurance covered this type of damage, pc world ha e offered the client vouchers to buy a new laptop of the same Value.
Based on this, how would you account for this laptop as the client has not paid for this
Just to add, there may be a VAT issue.. do vouchers hold income VAT (as technically it could be considered an insurance payout with no VAT) and the laptop definitely would have VAT to claim
So you could show the vouchers as other income, and add the laptop to assets after disposing of the old one..
Wow this is a really good question!!! Cant wait to hear others views!
I think that the fact that you didn't say thankyou, enter into a conversation with or even acknowledge the responses from Michelle should be a good indication as to why people no longer go out of their way to answer your questions.
Couple of items of site ettiquette have been adopted driven by current campaigns by Michelle and Joanne.
1) Real first name in bottom left of a persons signiture
2) Acknowledge peoples efforts in responding to questions
Both of those excellent campaigns underpin the site attempting to be a freindly extended office type environment for those generally working alone.
I appreciate that this response may not come accross as being freindly and helpful but I feel that we need to start enforcing the above campaigns if they are to be seen to work.
So come on, adopt a bit of a different approach to the posts and you will get far more out of the site.
regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Firstly, I would like to apologise to all members if I may have come across rude or unapprecitive in any of my posts. I sincerely apologise for this.
Shamus, I am happy to abide by the ettiquttes of the site as you mentioned in the previous post.
Please note that I am working off my tab therfore the view I am seeing for this is a mobile view therfore cannot see where you want me to add my name. Please can you help
Kind regards
Nadia
Looking at your question, I personally see this scenario more simply than Michelle's approach.
The new laptop is effectively a repair to the existing Laptop from the insurance.
Therefore the new laptop has already been written off through the books (fully depreciated) and the insurance has done its job.
There are no entries to make and no VAT to take into account.
Think of it in the same way that PC world had repaired the laptop under the warranty. Your client has suffered no cost and although the asset is now better than it was, it is still effectively the same asset.
Another way to think of it. If under the warranty the manufacturers replaced the motherboard, harddrive, screen, ram and case under a warranty would you capitalise that repair? No because they have simply fixed what you already had. In some instances such as the case here it is more cost effective to replace the whole unit but that does not make it a new purchase for your client.
HTH,
Shaun.
p.s. The above answer assumes that the voucher has no cash value and cannot be exchanged for anything else than a new laptop from the supplier that your client purchased the original laptop from. For a payment convertable to cash / redeemable against alternate goods see Michelles answer.
p.s.2 I've changed your signature to say "Thanks, Nadia" if you want it to say something else just let me know.
-- Edited by Shamus on Friday 23rd of October 2015 09:34:07 AM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for your response
I was a little confused as the new laptop is now of greater value, whilst the old laptop is written off, we now have an asset with a value so wasn't sure how to record it
