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Post Info TOPIC: How to record equipment purchase when part will be sold and other part will be rented


Newbie

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How to record equipment purchase when part will be sold and other part will be rented


Hi,

I work for an internet provider. We have recently bought network equipments which will be used at client locations to receive signal.

In some cases, these equipments will be sold to the client, while in others they will be rented to them. However, we don't know for the time being which portion will be sold and which portion will be rented out.

How should the purchase of these equipments be registered in books?

Thank you!



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Veteran Member

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Posts: 45
Date:

Hi

As your figures are unknown, I would record them all as fixed assets and then the rented items would just generate 'rental income' in the P&L. When/if you decide to sell any, you can record any monies over the price you paid as profits on sale of an asset....plus you have some flexibility because if there's a delay on selling the assets, you can utilise capital allowances to depreciate and manage down your profit.

I think that's the right treatment but it's a long time I dealt with Capital Allowances, however as your figures are unknown you can get away with stating you bought them with a view to rent out, but on certain models changed your mind.



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