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gorillapaws's avatar

Accounting question: is it a fixed asset if multiple items total over $500?

Asked by gorillapaws (25071points) June 24th, 2019

If you make a purchase of a dozen (for sake of argument) of the same item that are less than $500 individually, but collectively total much more than $500, all on the same invoice, do you need to book this as a fixed asset?

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5 Answers

stanleybmanly's avatar

The price is irrelevant to the definition of a fixed asset. The common definition is applicable to items not readily convertible to cash, such as your house or the new furnace in your house—things you are unlikely to buy or sell in a hock shop or yard sale.

JLeslie's avatar

What are the items? Most items that were lower in price I just put as an expense usually, maybe under small equipment or it really depended what it was. Like I think a computer could be a fixed asset or an office expense. Are you going to depreciate the items? Then I think it needs to be an asset, but something so inexpensive, it probably isn’t worth it. I don’t know the rules for that.

I’m no help. If you use an accountant for your taxes you might want to ask him or her.

Jaxk's avatar

I’m not sure I can help directly but the criteria is more on the useful life of the item. If it is expected to last a year or less, it is an expense. For instance a lease is an asset while rent is an expense. My opinion is that multiple items would be valued independently but I can’t say that with certainty.

gorillapaws's avatar

I’ve been doing some research and it looks like the de minimis safe harbor portion of the tangible property regulations is the relevant policy. If I’m reading it right, the minimum has been increasedfrom $500 to $2,500 as of 1/1/16, but it applies “per invoice or item.”

Based on that, I think I have to record my >$3k purchase of multiple items as fixed assets.

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