How to record the purchase of a capital asset for business and personal use

This article explains how to record the purchase of a capital asset that your business buys to use in your business and that you also use personally.

The way you record the asset purchase is the same regardless of whether you’re preparing your accounts using accruals or cash basis accounting. If you’re unsure how to record the capital asset purchase, please ask your accountant.

To record a capital asset purchase in FreeAgent, you can either add a bill, add an out-of-pocket expense or explain a bank transaction. Please note that recording the cost using more than one method will result in your cost being double or triple counted. Before entering this data, it’s a good idea to familiarise yourself with the difference between an expense, a bill and a bank payment in FreeAgent.

UK sole trader, partnership and limited liability partnership (LLP) accounts

If you have a sole trader, partnership or limited liability partnership account type and the asset was bought for both business and personal use, only enter the value of the asset which will be used for the business if you're adding a bill or out-of-pocket expense.

If you’re explaining a bank transaction, you’ll need to split it and explain the value that will be used for the business as a capital asset purchase and value that’ll be used personally as drawings. This is because you’re only allowed to claim capital allowances on the business use of the asset.

If you’re preparing your accounts using accruals basis accounting, find out how to record the purchase of a capital asset when using accruals basis accounting.

If you’re preparing your accounts using cash basis accounting, find out how to record the purchase of a capital asset when using cash basis accounting.

UK limited company accounts

If you have a limited company account type, enter the full value of the asset as different rules apply. Depending on how much the asset is used privately, and what it is in your actual business, there may also be a taxable benefit to record on form P11D in respect of this asset. If you’re unsure, speak to your accountant.

Find out how to record the purchase of a capital asset when using accruals basis accounting.

 

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