Hey. I want to make sure I'm recording this correctly because my parents paid for the asset and I'm not sure what to do with VAT. I checked the community for how to set up a fixed asset and set it up for depreciation. I don't have an accountant but when my self-assessment date comes around I'll hire one to help with recording the depreciation right etc.
I'm a sole trader, only had my business for about a month, and NOT vat registered but the supplier is so I paid vat on the device and the shipping. Device (£795) + VAT (£159) = £954. Shipping (£8.95) + VAT (£1.79) = £10.74. Total paid: £964.74.
Here's my step by step:
1. Went to Chart of Accounts and clicked new. Account Type: Tangible Assets, Detail Type: Machinery and Equipment, Name: Celluma LED Device, didn't select a default VAT code, ticked Track Depreciation box, Original Cost: £964.74 as of: date I purchased it.
Should I put the full amount I paid including shipping and VAT, or just the device cost: £795? And if I just put the device cost, how should I then account for the rest of the amount I actually paid?
2. So now in my Chart of Accounts I have the Celluma LED Device and the two sub-accounts: Depreciation and Original Cost. The journal entry is split with the device as a debit and Opening Balance as a credit. Am I right in thinking it comes up on the balance sheet but not P&L because it's not an expense?
Next issue is the fact that my parents sent me the money and I paid from my personal account, because I hadn't set up a business bank account yet. For other expenses that were paid like this, I've recorded the expense as journal entry with the first line using the correct expense Account and the amount goes in the debit column, then on the second line I've put Owner's Equity Account and the same amount in the credit column. I haven't created expense/cheque to reimburse to Owner's Equity for these because I'll be paying my parents back in the future when I've made enough profit. Is that correct?
So how do I account for the fact that the fixed asset wasn't paid for out of the business bank account linked to Quickbooks? Does this actually matter?
Would be grateful for any help! Thanks
