How to record the purchase of a capital asset between your business’s start date and FreeAgent start date
This article explains how to record the purchase of a capital asset that your business buys between your business’s start date and your FreeAgent start date.
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.
If the asset was bought after your company start date but before your FreeAgent start date, enter the asset as part of your opening balances. Please note that capital assets that are entered as opening balances will not appear in the Capital Assets report in FreeAgent.
You need to enter the original cost of all the assets your business bought between these two dates as debit balances into codes ‘601-[X]’, using the sub-accounts for the different kinds of capital assets you might have. You can add new categories if you need to.
The depreciation that's built up so far on all those assets should be entered as credit balances into codes ‘605-[X]’, using the ‘Depreciation Brought Forward’ sub-accounts for the different kinds of capital assets you might have.
Next, you’ll need to create the following journal entries to record the depreciation each year on the anniversary of the day you bought the asset, until the asset is fully depreciated:
- Debit code ‘460 Depreciation Charge’
- Credit code ‘606-[X]’, using the ‘Depreciation In Year’ sub-accounts for the different kinds of capital assets you might have
If you’re unsure how much depreciation to enter for a capital asset, or which journal entries are required, please speak to your accountant.