accounting Q re computer eq. expense handling

[quasilife]

Hello fellow RFDers,

I'm just wondering about how to best expense computer parts so as to make it both proper (in terms of CRA reqs) and efficient (i.e. going the current-expense route whenever possible).

Here's the situation...
Say I have 2-3 servers at home, 1-2 development workstations, and a few completely open test/junk/partial machines.... I'm a sole proprietorship, IT Consultant.

Now, say I buy a component for a server b/c something broke. Q1 - I see this as repair/maint. cost only, and it doesn't impact the CCA of the server in any way. But then, if say, it was a hard drive I replaced, and the old one was 80GB, while the new one is 500GB - does this affect the CCA in any way? How do I dispose of the old unit (in terms of accounting)?

Let's modify this a bit. Say my server had 5 disks in it, all of them part of original CCA calculation. One breaks down and I DO NOT replace it because of lack of capital or another interim solution - Q2 - how do I handle this in terms of accounting?

Let's complicate this further. I buy a major component for a production server... then decide it's not of use in the server, but I can use it in a test box. To me, it is no longer any kind of an improvement to my business - the next 3-5 years it's going to sit collecting dust 90% of the time, only infrequently being used in some rare testing scenarios. Q3 - what are the accounting repercussions of this, if any?

Disposal of components? I see at least three possible ways here - either I get a component and use it till it dies, in which case I throw it out. Alternatively, I could use it in a personal system at some point. Or, I might sell it on eBay. Again, how should each of these situations be handled on paper? And related-question - do assets need to be tracked on an individual basis - as in - say an accounting entry -> disposal/sale of graphic card XXX, serial no. 1234, bought on _date_?

Apologies for so many questions, but I've been searching RFD and haven't seen this discussed even though I bet this applies to many SMB owners around here...

Thanks!
QuasiLife

[Justin C]

I'm interested in the answers to some of these questions as well. Here is what I do though: when I started the business I setup the existing computers as capital and do 30% per year. Any upgrades/improvements have been small (under $1000) so I just write them off as "Office Expenses".

I work for a large company and we need to capitalize anything > $1000, everything else we just expense. That's what I'm basing my decisions on ;)

[quasilife]

Hmmm, that's interesting and makes sense "intuitively" for sure. I just hope others will post in the thread to give us more sense of the many ways to go...
One of my previous employers for example; now client, capitalized just about everything (I never understood why, but since they've been around forever and survived endless audits, that also told me that it somehow must make sense). On the other hand, using a med/large co. with a market cap of 30 billion or so as a template for my accounting might be a bad idea ;)

[DealsloverKK]

Here is my answer:

Hello fellow RFDers,


Now, say I buy a component for a server b/c something broke. Q1 - I see this as repair/maint. cost only, and it doesn't impact the CCA of the server in any way. But then, if say, it was a hard drive I replaced, and the old one was 80GB, while the new one is 500GB - does this affect the CCA in any way? How do I dispose of the old unit (in terms of accounting)?You write the old one off with the amortization that you have accumulated and once you write off the old one, you amortize the new one on that date that you bought it.

Let's modify this a bit. Say my server had 5 disks in it, all of them part of original CCA calculation. One breaks down and I DO NOT replace it because of lack of capital or another interim solution - Q2 - how do I handle this in terms of accounting?If you do not replace or fix it, it will not affect the CCA calculation

Let's complicate this further. I buy a major component for a production server... then decide it's not of use in the server, but I can use it in a test box. To me, it is no longer any kind of an improvement to my business - the next 3-5 years it's going to sit collecting dust 90% of the time, only infrequently being used in some rare testing scenarios. Q3 - what are the accounting repercussions of this, if any?What kind of test are you doing? Does it bring improvement of your business? If it does, you may be able to amortize it even you are using only 10% of it. You may also be able to qualify for TPC and SRED. Well, it all depends of what you are testing and its impact to your business.

Disposal of components? I see at least three possible ways here - either I get a component and use it till it dies, in which case I throw it out. Alternatively, I could use it in a personal system at some point. Or, I might sell it on eBay. Again, how should each of these situations be handled on paper? And related-question - do assets need to be tracked on an individual basis - as in - say an accounting entry -> disposal/sale of graphic card XXX, serial no. 1234, bought on _date_? That is a bit complicated to explain and it is very technical because it all depends to which scenario you are in.

Apologies for so many questions, but I've been searching RFD and haven't seen this discussed even though I bet this applies to many SMB owners around here...

Thanks!
QuasiLife

[quasilife]

Thx DealsLoverKK. OK, it's a brighter picture now. And yeah, I forgot about SRED - I'll have too look closer and see if I could apply it to my model so as to qualify.

Q.