Purchase of Assets in UK
Assets and Expenses
What is an asset ?
An asset is usually defined as premises, machinery or equipment that is owned
by the business, used for the purpose of carrying out the business, and likely to
remain in use by the business for a period of time.
Assets are recorded in an asset register.
Assets are depreciated according a straight line method or a reducing balance
method.
The materiality concept should be used to decide if an item represents capital or
revenue expenditure.
In an office, a computer would be regarded as an asset, but a stapler or paper bin
would probably be regarded as revenue expenditure.
Capital and Revenue Expenditure
The purchase of an asset is capital expenditure. The purchase of smaller items
is treated as revenue expenditure.
For example:
A computer and printer are purchased by a small business. These are treated as
capital expenditure.
Any delivery cost and installation cost (such as connecting to a network) are
treated as capital expenditure.
The cost of printer ink, paper and computer discs would be treated as revenue
expenditure.
Purchase of a vehicle
The following are capital expenditure:
Net cost of vehicle
Number plates
Delivery costs
The following are revenue expenditure.
Fuel
Vehicle excise duty / road fund licence
Insurance
Servicing
Download

Purchase of Assets in UK