![]() recording large/significant pieces of computer equipment within a profit and loss expense code (e.g. recording small incidental computer accessories within a fixed asset code, instead of using an expense codeĢ. The main inaccuracies relating to computer expenses that occur in Xero, and any other bookkeeping package, are:ġ. – Xero Code 763 – IT Software & Consumables (or create a more appropriately names expense overhead code) – if you decide that the item is an exense that should be wholly written off during the year. – Xero Code 720 – Computer Equipment – if you decide that the item is a fixed asset. ![]() Use one of the following Xero account codes, depending on your decision: Once you have decided on a minimum value for new fixed assets in Xero, you can apply that to all equipment purchases. We recommend that you talk to your accountant to find out if she/he has a preference on minimum cost for a new fixed asset item. It should be noted that there is no official minimum value threshold that applies when deciding on whether to capitalise computer equipment (and in fact any other item) as a fixed asset. Therefore, the cost to administer the actual work involved becomes a consideration when deciding whether it is worth recording an item as a fixed asset. The reason for this is that when an item is added as a fixed asset, then additional work is required to administer a ‘fixed asset register’ and calculate and record a depreciation write off over a number of years. However, you may have been told by your accountant that it is not worth ‘capitalising’ such items as a fixed asset, unless their value is over a certain threshold (e.g. Therefore, in a perfect world, the notebook computer would be recorded as a fixed asset within Xero. It will be hoped by the business owner that the computer will be of use to the business for a number of years. Let’s take a notebook computer as an example. In order to be a legitimate fixed asset, the computer equipment must pass the ‘bring future economic benefits’ test. Therefore, when we record computer equipment as a fixed asset within Xero, we are saying that this item has increased the value of the business (at least for the short-to-medium term) rather than reduced it’s value.įollowing on from the discussion above regarding fixed assets, we are not saying that all computer equipment should be recorded as a fixed asset – and this is where the ambiguity often lies. The difference in presentation between a fixed asset and an expense is that a fixed asset is included on the balance sheet report (which is a statement of position), rather than in the profit and loss account (which is a statement of performance).įixed assets do indirectly show, in part, within the profit & loss report, through depreciation (the writing off of the fixed asset’s value to a depreciation expense code over a number of years) – although depreciation will not be considered in this article. ![]() ![]() When considering computer expenses, an example of a fixed asset could be a computer purchased by the business which will be used by staff over a number of years. ![]() It does not include inventory (stock) that is bought by the business that is intended for resale. A ‘fixed asset’ can be thought of as something bought (and owned) by the business of value, which is expected to bring future economic benefit to the business – normally over the course of a number of years. ![]()
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