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  #1  
Old 02-17-2008, 11:45 PM
jayjohnson jayjohnson is offline
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Question "Supplies & Materials" vs. "Repairs & Maintenance" vs. "Fixed Asset"

I bought a USB cable for my PC for $9 (plus $5 S&H). How should it be categorized in my QuickBooks?
  1. Supplies & Materials ?
  2. Repairs & Maintenance ?
  3. Fixed Asset (Depreciation Expense) ?

(I can pick only one of those three, right?)

Thanks,
Jay
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  #2  
Old 02-18-2008, 01:06 AM
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I'd stick it in office supplies or computer supplies.
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  #3  
Old 02-18-2008, 10:57 AM
jayjohnson jayjohnson is offline
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Quote:
Originally Posted by lisa_mn View Post
I'd stick it in office supplies or computer supplies.
Thanks, Lisa. Should this go under the "Expenses" tab or the "Items" tab?

I initially entered it under the Expenses tab, but now I am unsure. The amazing thing about QuickBooks is that while it can go under the "Supplies" account, I still have to choose whether to consider it as an "expense" or an "item" (if the latter, I will have to create a new item for it).

I know how to manage "Fixed Asset" items in QuickBooks, but some things I just don't have clear answer.

So, in your opinion, should this cable go under the "Expenses" tab or the "Items" tab? (and why, if possible).

Thanks,
Jay
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  #4  
Old 02-18-2008, 11:28 AM
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This would go under the expenses tab.

The items tab is generally used for purchasing inventory, though it is also used for service and non-inventory items if you want to capture the specific cost of those items.
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  #5  
Old 02-19-2008, 07:45 PM
jayjohnson jayjohnson is offline
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Quote:
Originally Posted by lisa_mn View Post
The items tab is generally used for purchasing inventory, though it is also used for service and non-inventory items if you want to capture the specific cost of those items.
Well, I actually like to at least track what purchased items I have in my business. Nice to have, to be able to correlate a specific credit card charge with a specific item. I am not sure whether this is going to work against me in terms of proper bookkeeping and/or IRS taxation.

Follow up question: I bought an internal 500GB hard drive to upgrade my PC (I simply ran out of disk space and couldn't use that PC without additional storage). What would this be considered?

1. Supplies & Materials ?
2. Repairs & Maintenance ?
3. Fixed Asset (Depreciation Expense) ?

I am almost not sure it's not "Repairs & Maintenance" but by now I also know that accounting/IRS logic is not the same as mine .

Thanks,
Jay
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Old 02-19-2008, 09:49 PM
YourVirtualAsst YourVirtualAsst is offline
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The hard drive should technically be listed as equipment, which is an asset item, but if it was under $100 I would just expense it into equipment repairs. Another option is to list it as an asset and take a 179 deduction at the end of the year, which will still allow you to expense the full amount on your 2008 taxes.
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Old 02-20-2008, 07:01 PM
jayjohnson jayjohnson is offline
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Originally Posted by YourVirtualAsst View Post
The hard drive should technically be listed as equipment, which is an asset item, but if it was under $100 I would just expense it into equipment repairs. Another option is to list it as an asset and take a 179 deduction at the end of the year, which will still allow you to expense the full amount on your 2008 taxes.
Thanks, Rebecca. You demonstrated very well why I cannot decide where an internal harddrive (cost $108) should go:

On one hand, there is the IRS logic/rules, which allows me to take a 179 deduction - even if it is "listed property".

On the other hand, there is the accounting logic, which states that below certain cost/value there is no point as listing it as "fixed asset".

On the other other hand, there is my logic which says that, for my business, this is really like a repair because otherwise my computer would have become useless.

On the 4th hand, also according to my logic, I would love to track physical items that I acquired throughout time for my business. Since I am doing all this tedious QuickBooks bookkeeping, why not enjoy the feeling of being tidy and organized?

Any additional suggestion/advice?

Thanks,
Jay
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Old 02-20-2008, 07:47 PM
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The general rule of thumb I use for whether it should be a fixed asset or not is a threshold of $300, and many people use $500 as the bottom limit.

From a tax perspective, it really doesn't matter which expense account you use, because it will be in "other deductions" anyway. So put it where it makes sense to you. And to satiate your "tidy and organized" wish, you can enter a full description of what you purchased in the memo field of the expense, so it's easy in the future to see a list of everything that went into a particular account.


Hope this helps!
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  #9  
Old 02-20-2008, 09:16 PM
YourVirtualAsst YourVirtualAsst is offline
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Don't spend too much time over analyzing everything, just put it into repairs and forget about it. My biggest suggestion is to put as much detail in QB as possible about the items you purchased, so you don't have to pull receipts to figure out what an expense was for later.

Also, keep labeled files with all your receipts so it's easy to find them if you ever need to. I usually keep receipts for items that have warranties in a separate "warranty file" so at the end of the year when I start new files they don't accidentally wind up in storage.
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  #10  
Old 02-21-2008, 10:04 AM
jayjohnson jayjohnson is offline
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Thumbs up

Thanks, Lisa and Rebecka. Your advice really helps because this is my first year doing bookkeeping with QuickBooks and the entire concept of "Accounting fixed asset is not the same as IRS listed property" was somewhat hard for me to grasp.

Lisa, your rule of thumb of "under $300" is most helpful. It makes much more sense now.

On the other hand, I just purchased a monochrome laser printer for my business for $49.99... Logic (and QuickBooks) says it is a fixed asset because it is expected to have useful life of more than a year. But it is only $49.99, it feels stupid to create a new item for it on QuickBooks (although this printer comes with a serial number, as if it were a $5,000 product).

Times are changing: Something that used to cost $4,999 now costs only $49.99. no wonder I am so confused...

Add to this the fact that the instructions for Line 22 in Schedule C (Supplies that are not COGS) clearly state:

Quote:
However, if their usefulness extends substantially beyond the year they are placed in service, you must generally recover their costs through depreciation.
Clearly??? "generally"??? This is crazy.

Thanks,
Jay

Last edited by jayjohnson; 02-21-2008 at 10:30 AM.
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  #11  
Old 02-21-2008, 10:58 AM
jayjohnson jayjohnson is offline
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Quote:
Originally Posted by lisa_mn View Post
From a tax perspective, it really doesn't matter which expense account you use, because it will be in "other deductions" anyway.
I looked at Schedule C (the one I am using for my business) and didn't find a line named "other deductions". Instead, I found a line (27) named "Other expenses (from line 48 on page 2)".

The instructions for Other Expenses state:
Quote:
Do not include the cost of business equipment or furniture,
You see now why I am so confused?

I think that those office/computer equipment that cost less than $300 should go under "Office and Computer Supplies" as you previously suggested, and not "other expenses".

Am I right?

Thanks,
Jay
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  #12  
Old 12-08-2009, 04:02 AM
RobJoy RobJoy is offline
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The same dilemma happens in the UK. The accounting rule you are all missing is Materiality. This says (after translating into English) that you shouldn't worry too much about how you post small transactions. So, for your own convenience and record-keeping, you might want to create an expense account called 'Small equipment purchases' which you can report on as you require, for anything under your limit ($100 or whatever). But, dare I say it, even a government tax authority is not going to sweat over how you deal with them - not when they have banks' accounts to worry about!
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