Does equipment for a business count as an expense or asset?

[DQ24]

If you buy equipment for a limited company and use the company's money to buy it, does that cost of the equipment count as an expense on the businesses profit & loss statement, or is it classed as an asset on the balance sheet, or both? So say I buy musical equipment for a band, the band is set up as a limited company and we use the band/company's money for the equipment, do we put that down as a deductible expense on the P&L statement? But then will that equipment bought with the band's money then be added to the balance sheet as assets?

 

[DWS]

If you buy equipment for a limited company and use the company's money to buy it, does that cost of the equipment count as an expense on the businesses profit & loss statement, or is it classed as an asset on the balance sheet, or both? So say I buy musical equipment for a band, the band is set up as a limited company and we use the band/company's money for the equipment, do we put that down as a deductible expense on the P&L statement? But then will that equipment bought with the band's money then be added to the balance sheet as assets?

It can not be both, it is either expensed and appears on the P&L or is Capitalised and appears on the B/S either way it belongs to the Band.

 

[Mark T Jones]

It's really a conversation you need to have with your accountant

The actual answer is 'it depends' both on the nature/cost of the equipment and on what suits you best for tax purposes

 

[rach_anastasia]

Yeah, as suggested, speak to your accountant. I have purchased computing equipment for a business and it was tax-deductible, but it may not qualify in your circumstances.

 

[Gecko001]

If you hit it big in the first year and make loads of money, treating it as a simple expense might make good sense regarding tax efficiency. If you do not make much money in the first year, then other options would make more sense. As others have said, discuss with your accountant.

 

[alisson38]

In most cases, if the equipment you're buying is going to be used for more than a year—like musical instruments or sound gear—it’s usually treated as an asset and goes on the balance sheet. Then it gets depreciated over time, which means a portion of the cost shows up as an expense each year on the profit & loss statement.
If it's something smaller or used up quickly, then it might just be expensed right away. But for things like band equipment, you'd generally record it as an asset and depreciate it.


Hope that helps!

 

[DontAsk]

I see nothing wrong in using capital allowance for equipment that lasts multiple years. My decision would be on the value of the purchases and the hassle of depreciating reach year

 

[MyAccountantOnline]

If you buy equipment for a limited company and use the company's money to buy it, does that cost of the equipment count as an expense on the businesses profit & loss statement, or is it classed as an asset on the balance sheet, or both? So say I buy musical equipment for a band, the band is set up as a limited company and we use the band/company's money for the equipment, do we put that down as a deductible expense on the P&L statement? But then will that equipment bought with the band's money then be added to the balance sheet as assets?

As others have said it depends on several factors but generally for a typical small company I'd set a limit of about £500 for capitalising equipment costs - so over £500 on the balance sheet under £500 in the P&L.