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• # 100482
• Wed 02 Jul 2014 10:19 AM

Hello everyone.

Hope someone can help.

I look after the books for my local flying club and it is practice on our balance sheet that we list all assets regardless of value.  we dont depreciate them as they are often just small items (ie sound meter £50 etc etc).  the thinking is that rather than just charge these small items to revenue fro a given year if we show them on the balance sheet that when the accounts are produced all the club members can see at a glance what is "owned" by the Membership

So essentially the balance sheet also incorporates an inventory control of assets.

But the other day the chairman found a stihl strimmer in the club container that isnt on the balance sheet/inventory list and he wants it added there to keep the inventory list up to date.

Ive trawled through the club receipt book and found the previous treasurer bought the item 11 year ago but forgot to add it to the balance sheet/inventory control

Normally I simply debit "asset purchase: item xx" and credit bank account.  Thats fine but how do I add an 11 year old itme now?????

If I add it to the assets section of the BS this means my bootom line of the balance sheet (the represented by bit) is out obviously.  Do I simply add an extra line in the represented by bit, something like "asset previously charged to revenue"?

Thanks in advance

Kindest regards

Craig    

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• # 100489
• Wed 02 Jul 2014 01:45 PM

The general accounting principle for deciding whether a purchase is an asset or not is twofold.  1. Does it have a useful life of more than a year? and 2.  Will it have a residual value if it is disposed of?  If the answer to either of these questions is NO then you should not really be capitalising the purchase.  Also, if you are merely adding to the value of assets without accounting for any wear and tear then you are not giving a true representation of the organisation's 'worth' which is what a balance sheet does. 

If you really want to attach a value to an 11 year old small tool then it should be based on the answer to question 2 above and the bookkeeping entry is Dr BS and Cr P&L

• Roz

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• # 100492
• Wed 02 Jul 2014 02:09 PM

Hi Roz,

Thanks for your reply. appreciate your help

Yeah I know what your saying, the answer to the first part is "yes" (more than one year - still going strong 11 years later) and I guess in the real world the second part would be "no".

But its just our members like them all listed on the balance sheet (club and society accounting - Inc and exp ac and BS) so they know whats what regardless of wether it has any residual value or not.  Its a little quirky I know but its what they want and I guess saves havingf a seperate inventory control.

Ill do as you suggest

Kindest regards and thanks again

Craig

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