Greetings! I’m a small business owner, we create and sell skin care products in the USA, and I’m hoping someone can help clarify some accounting questions with regards to various assets (at least I believe they are treated as assets but I could be wrong).
There are a few different types of assets and it’s not clear to me how these are treated, if they are treated differently, and how long we depreciate them if at all.
- Our jars have special screw caps that required a mold to fabricate. The manufacturer of the mold (in China) guaranteed us that we would have exclusive rights to use the mold. The mold cost us nearly $6,000 to create. Is this a depreciable asset? We do not have physical control of the mold and if we requested the mold be transferred to us, we would likely meet resistance from the factory.
- Our jars and bottles are hot-stamped with our logo. This hot-stamping required special tooling to be created, but only one time. The tooling cost over $1,000. Is this a depreciable asset? Again, we do not control this tooling, it is controlled by a company in France.
- When we purchase glass jars (which will eventually contain our creams and so forth) we are required to purchase 10,000 units at a time. We do not sell through these jars in one year. Are they assets? How do we carry these product components on our books?
- When we place our product in a store, they are displayed inside special display units that we provide. These displays cost more than $500 per unit. Are these depreciable assets? We retain ownership of the display units, they are not sold to the store.
Thank you for any help. We only recently began making relatively large purchases as we’ve grown, so we aren’t accustomed to thinking about things as assets. In the past we would order only a few units of glass or what-have-you and sell through it quickly, and the other items (mold, tooling, etc) were also recent purchases.