asset multiple items together or separate?

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How do you guys handle situations multiple items are purchased that total over what the asset threshold (many accountants use $300 to $500) would be?   For example if my client purchases a single table for $1000 I would allocate that expense to an asset account and depreciate it each year.   However, what if there were 10 tables at $100 each?   Do you still have to allocate the entire amount to an asset account?  I myself tend to think not (since if they were purchased separately they would all be current expenses).  I question this as the accountant for one of my clients transferred a bunch of small individual furniture purchases that combined were almost $1000 for the year.  I questioned why she did that since some of those items were only $20 each.  She said they have to combine all those purchases together as 1 asset.  I've never seen this happen for any of my other clients who have this situation quite often especially for tools.  They have multiple purchases during the year but all under $500 each.  According to this one accountant all the tool purchases for the year would end up being allocated as an asset since the total of all purchases were over $500.  Doesn't make sense to me.  My understanding is individual purchases above the 'threshold' would be an asset. 

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  • 0

    I would consider a single purchase of multiple, but similar items as capital expense. I would even be willing to add in an additional purchase if more of the same are bought within a short period of time. I think it should also depend on the life expectancy of the item(s). If it is something that will need replacing within a year or maybe even two years I would consider them as operating expenses. While there are some guidelines published by the CRA it is very much up to the individual situation as to how this will be handled. The important thing as I was told is consistency of recording across all purchases.

  • 0 in reply to Alwyn

    sorry....just saw your reply.  In this client's case the furniture items were purchased separately over the course of a year.  But she just looked at the total of all of them combined and transferred that balance to the asset account.  Your reply makes sense if it was a single purchase of multiple items....but to asset a bunch a small purchases that were separate over the entire year makes no sense to me.

  • +1 in reply to swissmrs59
    verified answer

    On the surface I would agree with your thoughts, however, grouping items purchased in the year is not uncommon. In my experience, the most common situation for grouping would be if the furniture was for a 'new' office and the purchases were made over time to find the right pieces. As mentioned earlier it is a grey area and each accountant might look at the situation differently. In the end it is the accountant who will be there through an audit for explanation. I try to question this type of situation in an email so that the response is documented as well.

  • 0 in reply to Alwyn

    nope, not that situation either.  The business has been around for several years and they never did an entry like that before.  I did question it when I got the adjusting entries and she said this is the way it's supposed to be done.  Who am I to argue?  Like you said, they'll have to explain it if ever audited.

  • 0 in reply to swissmrs59
    but to asset a bunch a small purchases that were separate over the entire year makes no sense to me.

    We usually do what's practical rather than follow the letter of the law.  It's erring on the side of caution to claim lower expenses by capitalizing & taking only CCA for everything that it technically an asset.

    The $500 limit is only for Class 12 assets, some may think it applies to every purchase. 

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  • 0 in reply to swissmrs59
    but to asset a bunch a small purchases that were separate over the entire year makes no sense to me.

    We usually do what's practical rather than follow the letter of the law.  It's erring on the side of caution to claim lower expenses by capitalizing & taking only CCA for everything that it technically an asset.

    The $500 limit is only for Class 12 assets, some may think it applies to every purchase. 

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