MBE QuickBooks Tips
So many things in accounting can be black and white but there are also cases where guidelines can be unclear. While running your day-to-day operation, you have to decide whether or not the purchases you are making should be expensed or capitalized based on these general guidelines: Durability Is the item going to last several years, or is it short term? If this is something that you plan to have around for several years, the tendency is to make this item a fixed asset.
Materiality: Was this item minimal in cost compared to your income and other expenses of the business? A good guideline to follow is, did you pay more than $2,500.00? Once your purchase price has exceeded the $2,500 mark it should be a fixed asset and not an expense.
Consistency: How have similar items in your business been treated? If this is something that is replaced often due to wear and tear, then you are going to expense this item. But if it is something that you are purchasing one time or replacing because it has reached its expected life, then you would make this a fixed asset.