Hi everyone,
I have a client who owns a small firm (turnover £70k) and he recently bought a phone worth £660. He insists that I should use the phone as an expense and not depreciated it as an assett. What would you recommend? and what is the best way to depreciate it? Thank you!
Replies (5)
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Most companies will have a 'de minimis' capital threshold, below which items are treated as revenue expenses rather than capital items, even if technically the items meet the definition of an asset.
This is a matter of judgement for the directors of the company. Presumably in this case the owner is also the sole director, and therefore he can set a capitalisation policy to say that small items like this phone are to be treated as revenue expenses, as long as he is consistent in applying it.
If you do end up capitalising it, the depreciation policy should be based on the estimated useful life of the asset. Again, this is a matter of judgement.