I will be speaking to my accountant about this, but I wanted to get other opinions as well.
Broadband Expenses and Computer Equipment Expenses.
Broadband Expenses is under Client Expenditure - what accountants would call cost of sales. Computer Equipment Expenses is under Company Expenditure - what acountants would call operating costs.
Now, when I buy an Internet Router for my Internet, I would put that under Computer Equipment Expenses as its computer equipment that I buy for my company, not on behalf of a client.
However, for my clients, I would be buying four items for them. Line Rental, Broadband Service, Internet Router and lastly a computer for them, that would be used for Internet Filtering. I would charge them a set annual fee for broadband services. I have been putting these four costs in Broadband Expenses under Client Expenditure as these are purchases made on behalf of a client.
My problem however is twofold.
I want to see how much profit I make on annual costs each year. This would be the line rental and broadband service and pro-rata portion of Router and Computer. Putting the Router and computer into Broadband expenses distorts the annual costs as both router and computer are costs that are spread over say 5 years, but I have to put in the full purchase price.
The secondary problem is that I have bought equipment in the last week for new clients that will be starting onboard in April, which is when my new tax year starts. I am not selling the computers and routers directly to the client. Because if the clients cancel the broadband service, I take back the router and computer. So I am spending money in this tax year on equipment that will make me a profit in the following years, but not this year! This again distorts my reports in terms of annual profits on broadband service each year as I am recording a significantly lower profit on broadband this year and will have an artificially higher profit over the next five years.
To sum up, the computers and routers that I buy for clients are provided as part of the broadband service, but remain the property of my company for the duration of that service. In addition, I don’t want the expense to be shown in one year, but rather spread over several years as the equipment should last at least five years. Lastly, if I move it out of Broadband Expenses account, I am still unable to calculate what the broadband service profit is as the computer equipment expense account would cover expenses other than broadband expenses such as a laptop for myself etc.
Would Broadband Capital Equipment under balance sheet be suitable as I understand that I can show this over five years or something and I could rig up reports to add the pro-rata annuall costs over five years and add this to the Broadband Expenses.
To complicate the issue - I have the same question as above for Email and Backup Services - specifically I buy computers to run the email and backup services. Putting this under Email Expenses distorts the annual costs, but I don’t want to put it under Computer Equipment in expenses as I want to breakdown the broadband, email and backup expenses so I can see exactly how much I spend on each service over a period of five years etc.