How do I categorize a pendrive used for playing songs in a woofer in a restaurant? Should I consider it as a inventory/non inventory/fixed asset?
How much did it cost?
You should have an accounting policy that specifies that any item purchased over a fixed amount is treated as a fixed asset and depreciated over the lifetime of the item.
An inventory item is something which the business purchases with the intention of selling to customers. That doesn’t seem to be the case here.
Finally, if it is under the fixed asset limit just charge it to general expenses or some such account
Thank you @Joe91 . I don’t think charging it as an expense align with accounting principle because the ‘pendrive’ is still there and it might remain there for longer than an a/cing period.
Your idea of setting the amount for differentiating fixed and current asset make sense …But my question is where should I record ‘current asset’?
Hope that I was clear this time.Thank you.
There is no thing as a “Current Asset”
There is nothing to stop you adding it as a Fixed Asset and depreciating it over the estimated life of the pendrive 3, 5 or 10 years
But for small amount such as a pendrive, I wouldn’t bother but that is your choice
Got it! You mean, for something which is not an inventory and is lesser in amount than that, which is fixed as a Fixed asset indicator, can be treated as an expense directly.
But what if many such small amounts sums up? does that give a clear picture of the Balance sheet? For example crockeries, kitchen and bar tools etc…
apologies in advance if I am being too moron. thank you.
If you are running a restaurant, I would certainly consider the plates, pots, etc as fixed assets. You wouldn’t need to account for each and every spoon, cup etc but you would normally count them as fixed assets.
So cutlery, crockery etc would be an item
After all they will presumably last a few years
Hi @Suraj239, I work with many restaurants; items such as kitchen utensils, barware, plates, glasses, etc. are generally treated as operating supplies and are expensed directly in the period they are bought. This is considered an industry standard so your balance sheet would be considered to be a fair presentation.
That said, there is nothing preventing you from treating them as fixed assets if you choose. The main thing is to set an accounting policy for how your business will handle capitalizing fixed assets. After that, make sure you disclose it to anyone who will read your financials, and make sure to consistently apply it.
I would consult the Tax Authority in your country as they normally stipulate the minimum amount for goods to be considered as fixed asset. In The Netherlands, e.g., that amount is 450 €: up to this amount you book it as expense and above as fixed asset.
thank you @Mark will definitely do so.