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Purchase a fixed asset

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Summary

How to record the purchase of a fixed asset such as vehicles, machinery, or office equipment in Accounting Start.

Description

You should deal with fixed assets differently from your normal day-to-day purchases. Here we explain how to record the purchase of a fixed asset such as vehicles, machinery, or office equipment.

  • Make sure you have the correct Fixed Assets categories
  • For assets bought using a loan or hire purchase, how to:
    • Include fees and deposits
    • Manage repayments and interest charged

Resolution

There may be times when you purchase items that are for the long-term use of the business. You're likely not going to convert these quickly into cash and are known as Fixed assets.

Some common examples of fixed assets are:

  • Vehicles (such as company cars or commercial vehicles)
  • Office Furniture, fixtures, and equipment
  • Machinery
  • Buildings
  • Land

Purchase an asset

Record the purchase of an asset using the Money Out option.


Which category do I use?

  • Select a Fixed Asset category

This is because you need to show the values of the asset on your balance sheet. This is unlike normal purchases which show on your profit and loss.

We have set up the following Fixed Asset categories for you. If you have other types of fixed assets, you may need to create your own similar categories. Create new categories.

Category code Category name

0001

Assets – Cost

0010 Property -Cost
0020 Plant and Machinery - Cost

0030

Office equipment and IT – Cost

0040

Fixture and fittings – Cost

0050

Motor vehicle - Cost

Asset bought using a loan or hire purchase

If you buy and finance a fixed asset with a loan or hire purchase, you’ll need to include charges at the same time as the purchase.

To help you keep track of how much you have left to pay, record your monthly repayments and any interest charged in your accounts we recommend that you:

  1. Create new categories accounts for record hire purchase fees.
  2. Record the original purchase using a journal. The journals may vary depending on whether you have used part exchange.
  3. Record the re-payments, including any interest charge.


Part exchange

If you want to part exchange an existing asset when purchasing a new one - follow the steps below. This is to remove the value of the exchanged asset from your balance sheet and record the purchase of the new asset.


VAT on hire purchase

If you are unable to recover VAT associated with your hire purchase, you should record the net value of the assets in the appropriate category. For instance, if you are dealing with motor vehicles, you should use the category "Motor Vehicles – Cost (0050)" to account for the net cost without VAT.

In some lease hire agreements, you can only reclaim 50% of the VAT. In this case, enter half of the VAT amount using the VAT on Purchases, category. Then the remaining VAT to Equipment hire and rental.


How to record payments

 






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