Question about depreciating computers

[phil81uk]

Hi, Some questions about depreciating computers...

As I understand it, I depreciate them by 25% of the written down value;

Cost new £1000

So, on the day of purchase I move money from Bank account to Fixed Asset, and immediately depreciate it by 25% (£250). Correct?

£1000 Bank account => Current Assets £1000
£250 Current Assets => Depreciation £250

One year after purchase (25% of £750);

£187.50 Current Assets => Depreciation £187.50

Correct?

Here are my questions;

(1) Do I depreciate it by 25% on the day of purchase? Or does it stay as a £1000 asset until one year afterwards?
(2) Does it get depreciated every year from the date of purchase, or does everything get depreciated at once (ie all my assets) at the year-end?
(3) What about computers purchased second hand? Do they work the same? I guess not as a new computer losses value as soon as it is purchased, while a used computer is worth the same before and after its purchase.
(4) If a computer is sold do I simply do a journal entry transfer from Depreciation to Assets to adjust the value, and then from assets to bank account to show that it is sold?

I use Sage Line 50 for my Limited Company. I can make journal entries and I understand double entry book keeping. Other than that I know very little about accounting.

 

[primeaccounts]

Hi there

Your theory is right.

Basically your company will have an accounting policy for the depreciation of its different classes of assets. For computers you could use 25%.

When you buy they PC, as you say you would transfer the cost to the computer code in sage (fixed assets - not current) which would be something like '0030' (nominal code) from memory.

You would then start to depreciate the asset on the basis of your depreciation policy which can be 25% on a reducing balance or straight line method.

It doesn't really make any difference re the date that you do this (unless you are producing management accounts as well). You could just do all the depreciation journals at the end of your financial year or monthly if you so wanted to. The journal here would be to debit depreciation (nominal code 8000) and credit '0031'.

It would then be depreciated again in year two and year 3 as necessary until it either has a nil value or you dispose of it!

Computers purchased second hand would work in the same way - the lower value should be reflected in the lower purchase price.

If you sell a computer in the same year that you buy it, do not charge any depreciation - you would only need to do a bank receipt to the fixed asset nominal code to account for this. If you sell in a later year, again dont charge depreciation in the year of disposal just do the bank receipt journal.

For tax allowances (capital allowances) you can claim at different rates for first year allowances.

Hope that helps and hasn't confused things further!

 

[Dawg]

Ask your accountant, as mine advises that any computer expenditure of £750 or below can be classed as a revenue expenditure.
So seperate the box, the screen etc and get it all in year one.

 

[phil81uk]

That all sounds good to me. Do I depreciate the computer in the year I purchase it, or only *after* one year?

Does this also apply to printers and computer accessories like spare laptop batteries (nothing over £150)?

 

[profitxchange]

You can depreciate any asset. Or write it off in year of purchase if it is below a significant value. The tax man has some guidelines on this just give them a call, they are usually very helpful. Depreciation only accummulates during the year at 1/12*25-30% per month or at year end - it depends on how picky you want to be. it is only a paper transaction to set aside funds for replacement in due course with tax free money.

 

[Computer Waste]

Computers do depreciate quite a lot over time. If you require a computer disposal collection look here

 

[elaine@cheapaccounting]

Computers do depreciate quite a lot over time. If you require a computer disposal collection look here

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