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How to record the purchase of a capital asset using multiple transactions

This article explains how to record the purchase of a capital asset in FreeAgent if you’ve paid for it using multiple bank transactions.

If you paid for a capital asset using multiple transactions, follow the steps below to create a bill for the purchase and then explain the bank transactions once they’ve been imported into your FreeAgent account via a bank feed or uploaded from a bank statement.

Please note that you’ll need level 6 access or above to your FreeAgent account to follow the steps below. You’ll also need to ensure that the person or organisation that you’ll be paying for the asset is set up as a contact in FreeAgent before you create a bill for them.

For information on how to record the purchase of a capital asset using a single bank transaction, please follow the instructions in this article instead.

1. Create a bill

First, you’ll need to create a bill for the total purchase price of the asset.

To do this, navigate to the 'Bills' tab at the top of the screen.

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Select ‘Add New Bill’ and follow the steps for creating a bill in FreeAgent.

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Make sure that you enter the full amount paid in the ‘Total Value’ field.

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Select the relevant capital asset category from the ‘Assets and stock’ section at the bottom of the ‘Category’ drop-down menu. If none of the available capital asset categories are suitable, you can create a custom category.

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Choose how many years the asset will be useful to your business from the ‘Asset Life’ drop-down menu.

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Once you’ve entered all of the relevant information for the bill, select ‘Create and Finish’ to complete the process.

A record of the bill being created will appear in your Audit Trail report.

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Viewing the asset in your capital asset register

Once you’ve created the bill, the asset will be added to your capital asset register in FreeAgent. For information on viewing the capital asset in FreeAgent, please see this article.

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FreeAgent will automatically claim the Annual Investment Allowance on your asset unless you or your accountant sets the tax treatment differently. For information on how to claim a different allowance such as the Writing Down Allowance, please see this article.

2. Explaining the money paid out of your bank account

Once the relevant bank transactions for the purchase of the capital asset have been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you’ll need to explain them using the appropriate ‘Type’ and ‘Category’ as detailed below.

Navigate to the ‘Banking’ tab at the top of the screen and select ‘Bank Accounts’ from the drop-down menu.

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Choose the relevant bank account from the list.

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Select the first transaction that you’d like to explain.

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Select ‘Bill Payment’ from the ‘Type’ drop-down menu and select the bill created for the capital asset purchase from the ‘Bill’ drop-down menu.

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Select ‘Explain Transaction’ to complete the process.

Repeat this process for each of the transactions related to the purchase of the capital asset, including any initial deposits paid.

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A record of the bank transactions being explained will appear in your Audit Trail report.

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What happens next?

Once you’ve explained all the bank transactions related to the purchase of the capital asset, the bill will show as paid in full.

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Please note that if you’re on the VAT Flat Rate Scheme and the total value of the capital asset purchase is £2,000 or more, the purchase will appear on your VAT return. This will apply even if the value of the individual bank transactions is less than £2,000.

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