Fixed assets: capitalisation, depreciation and disposal
One decision at the start of an asset's life — capitalise or expense — governs the statements for years after it. Which is why it deserves to be made by a rule rather than a judgement call.
Built forAn accountant who needs a concise treatment that can be applied and traced
When you need it
One decision at the start of an asset's life — capitalise or expense — governs the statements for years after it. Which is why it deserves to be made by a rule rather than a judgement call.
The decision it supports
Start with “What enters the cost”, then use the explanation to choose the next treatment or check.
What you receive
Work note: Fixed assets: capitalisation, depreciation and disposal
A structured explanation, every official rate with source and review date, then a direct path to a lesson, tool or track.
An example you can inspect
Apply the decision: What enters the cost
An asset's cost includes everything spent to make it ready for its intended use: its price, freight, transit insurance, installation and commissioning tests. These are costs that would not have been incurred but for the asset.
Continue the workflow
- The Fixed Assets Accountant trackAvailable now
- Tool: straight-line depreciationAvailable now
What enters the cost
An asset's cost includes everything spent to make it ready for its intended use: its price, freight, transit insurance, installation and commissioning tests. These are costs that would not have been incurred but for the asset.
Whatever is unconnected to its readiness is expensed: operator training, advertising the new product, and general start-up costs.
Depreciation, then disposal
Depreciation spreads the cost across the years of benefit, and starts at the date of readiness rather than the invoice date. Its method and useful life are estimates to be reviewed, not constants entered once and forgotten.
On disposal the proceeds are compared with net book value, and the difference is a gain or loss on disposal — not operating revenue, and not presented alongside it.