A guide to the Capital Assets report

This article explains how to access and understand the Capital Assets report in FreeAgent.

You'll find the Capital Assets screen by navigating to the ‘Accounting’ tab at the top of your screen and selecting ‘Reports’ from the drop-down menu.

In the ‘Breakdown’ section, select ‘Capital Assets’.

What you'll see here is each asset that your business has bought, listed at its net book value. Net book value is the net of VAT price, less depreciation.

FreeAgent will then work out its depreciation over its useful life. If the business is a UK Limited Company, FreeAgent will also work out the capital allowances you can claim against your corporation tax bill.

The first year's worth of depreciation is posted on the day the asset was bought, because an asset immediately loses part of its value when it is no longer brand new.

Then, every year on the anniversary of the purchase of the asset, FreeAgent will post another year's worth of depreciation, until the asset's useful life has finished. The asset would then be referred to as 'fully depreciated'.

How will the asset show in my accounts?

In the profit and loss account, only the depreciation for that year shows as a cost.

In the tax computation, that depreciation is added back to your business's profit. This is because, instead of including depreciation when you are working out the amount of profit to pay tax on, you have to use HMRC's prescribed figures, which are called capital allowances.

In the balance sheet, you can see the cost of all the capital assets your business has bought, less the depreciation posted to that date. The cost less accumulated depreciation is called the book value, or net book value, of the asset.

Because the trial balance shows you all the accounts in your business, you can see both the depreciation charge (which goes to the profit and loss account), and the total net book values of all the capital assets your business owns.