[GNC] Is it reasonable to have sub-accounts under Equity:Fixed Assets?

[David Cousens]

Dave,

Whether your purchases are second hand or not is irrelevant to their
depreciation as assets in your business (that is unless your tax authority has a
rule stating otherwise). The depreciation rules and rates are set by your tax
authority and they usually have a schedule which sets out what purchases can be
depreciated and at what rate and which can be expensed to your business
immediately at purchase (there is usually a threshold value).
 
When you depreciate an asset each depreciation event is a write off of part the
value of the asset to the appropriate expense account (credit to asset account-
debit to expense account). It is completely written off when its book value as
an asset reaches zero. It may still function and be useful to your business
beyond that time however.  Most tax authorities will also allow a pool of low
value assets to which you can add new low value asset purchases and the pool is
depreciated as a whole - depnds very much on jurisdictional rules. 

If you want to record your history of capital purchases you would need to
construct this from the records for each year in your books for that year- a
separate management exercise and proper ERP software would do this for you but
it records and maintains a lot beyond the accounting information to do so.

It is common to use an account structure for depreciating assets in which a
placeholder account for the particular  asset has a sub account which is debited
for the original purchase price and a second sub account or contra account in
which the depreciation events for that asset are recorded by crediting the
asset's depreciation account and debiting the depreciation expense account for
the amount of the depreciation. I.e.

Asset:Particular Asset
Asset:Particular Asset:Purchase Value 
Asset:Particular Asset:Depreciation - contr account to record depreciation

To record an existing item which is partially depreciated already when setting
up the books you would credit this account for the accumulated depreciation to
the date of the start of your new books and debit an Equity->Opening Balances
account (or sub account) for accumulated depreciation and you would debit the
Asset:Purchase Price  value by the amount of the original purchase price and
credit the Equity:Opening Balances account for that amount. This will allow you
to carry forward existing depreciating assets into a new set of books
 
Dealing with pooled assets will strongly depend on your jurisdictional rules as
does depreciation in general.


David Cousens.


On Tue, 2023-01-17 at 22:29 +0000, Dr. David Kirkby wrote:
> On Tue, 17 Jan 2023 at 18:58, Adrien Monteleone <
> adrien.monteleone at lusfiber.net> wrote:
> 
> > 
> > Maybe I misunderstood, I thought you wanted to track the items' values &
> > depreciation separately. By all means, otherwise lump them in one
> > account. (you can of course make separate transactions for each item,
> > which would allow you to run Transaction Reports filtered on each item
> > if needed)
> > 
> 
> I might do that.
> 
> > 
> > > What would you do for transactions that have already been written off? I
> > > was tempted to add those, as the company has been going for 8 years, so
> > > whether I add 8 years of assets or 5 does not make much difference - am
> > > extra 55 items.
> > 
> > I don't see why there would be any need to. If they are already zero,
> > they don't need to enter the book at all as far as I can tell.
> 
> 
> Although written off, it might possibly be of some use to be able to look
> back over the years and see what was bought.
> 
> If something had been purchased 4 years ago, would you bother recording the
> value each year, or just that when the accounts were submitted? I guess
> that’s probably a personal preference.
> 
> I think nearly everything of mine is written off after 5 years. I think
> some companies might write electronic test equipment off over a longer
> period, but virtually all of mine is purchased used, and often when the
> manufacturer considers it obsolete.
> 
> > 
> > Then continue to depreciate as instructed by your accountant. None of
> > this involves Vendors or Bills.
> 
> 
> Okay.
> 
> > 
> > 
> > 
> > Regards,
> > Adrien
> 
> 
> Thank you for the help. I didn’t get anything done with my accounts today,
> due to other more pressing issues like dispatching items to customers, and
> attending to my dog who has a bad paw.
> 
> Dave
> 
> > --
> Dr. David Kirkby,
> Kirkby Microwave Ltd,
> drkirkby at kirkbymicrowave.co.uk
> https://www.kirkbymicrowave.co.uk/
> Telephone 01621-680100./ +44 1621 680100
> 
> Registered in England & Wales, company number 08914892.
> Registered office:
> Stokes Hall Lodge, Burnham Rd, Althorne, Chelmsford, Essex, CM3 6DT, United
> Kingdom
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