Accounting: How does equipment and tool purchases appear in a general ledger?
Ryjasu asked:
The questions I have for you accountants are:
1) What type of equipment and tools qualify as and asset and should therefore be added into an asset account (Vehicles I know do, but what about power tools, computers, office equipment, tractors, trailers, etc.) How can I distinguish?
2) Do equipment purchases that appear in an asset account also need to appear in an expense account?
Basically I have been given the task of accounting for this company and I’m not an accountant. The equipment thing is boggling my mind. Please help.
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Generally, if the equipment is going to be used for more than one year, it is placed on the balance sheet as an asset and depreciated over its useful life. Say the company buys a computer for $2000 and its expected useful life is 5 years. Put it on the balance sheet as an asset and for each of the 5 years, you reduce the balance of the asset account using the contra-asset account ‘Accumulated Depreciation - Office Equipment’ and allocate $400 to the expense account ‘Depreciation Expense - Office Equipment’. capwest5a