I'm doing my monthly accounting for Canadian Poncho and have a question. Last month I bought a netbook pc which I take to work and use on my lunch hour to do site maintenance. I wasn't sure how to enter this purchase in Quickbooks so I called my accountant. He is out of the office however his assistant said to enter it as a capital expenditure. I didn't have a "capital expenditure" account set up so I googled and apparently I need to set up a "Fixed Asset" account in Quickbooks for such purchases. I did this. Now since my sales are pretty low I enter everything as a journal entry. Do I simply do a a journal entry showing the purchase from my company bank account to this new "Fixed asset" account?
That sounds right Todd, I'm not an accountant but know this . Anything that you buy thats over say 500 $ that is not an expendable expense you have to create a capital acct that you depreciate instead of write down. Now on computor equip you can depr. 100% so you could actually list it with your expenses and write it all off anyways but for proper bookeeping you should create the capital asset acct for computer equip and software and then depr that acct 100%, and yes you can journal it over. In our co. we captialize items over 1000 because its a lot of hassle and then everything else gets written off. Everything on this capital list ends up in a depreciable asset file thus showing the annual net book value and that goes on and on forever.
Each business can implement it's own policy on the value of acquisitions that are to be capitalized. Capitalization and subsequent depreciation is a methodology used to match revene and expenses over time as the assest aquired generates income and loses value.
So Todd you have done the entry properly. You will now need to have a discussion with your accountant to determine the appropraite method and amount of depreciation. The Capital Cost Allowance permited by CRA regualtions for Computers (Class 45 Assets) is 45 % per year. You don't have to adopt this as your policy BUT tax filings have to be adjusted to this if you don't. I use 3 year straight line depreciation for computers which means the book value is zero aftrer three years. Computers are getting to the point that they are almost disposable goods in large businesses.
effective Jan 27, 09 to Feb 2011, computers are in class 52 which is 100% write off. I am assuming that you are declaring Canadian Poncho on your personal income tax return.
Check with your accountant about the classification when it is time to file your personal income taxes next year. Can't write it off this year.
My accountant called when I was out and told my wife this. However my "fiscal year" is Jan - Jan so I assume I can't write the computer off until next year. Correct?
