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Expenses

Hi

We recently bought a fridge and oven for the kitchen of a new restaurant. Since these expenses are part of my start up cost for the new restaurant, how do I need to categorize these expenses?

Solved
Best answer 01-11-2019

Accepted Solutions
Level 15

Re: Expenses

the items are not expenses, they are fixed assets which you will depreciate over time.

see your accountant

View solution in original post

Anonymous
Not applicable

Re: Expenses

Hi Nicola,

 

The answer offered is certainly right!  

However, that's also what will happen to those charges at year end and with your accountants help, will be classified, depreciated, and generally accounted for correctly.

However, I'm getting the sense that part of your question is 'where do i put these in the meantime so that my accountant will find them and do their stuff with them'?

 

If I'm right in sensing that, here is what you need to do:

Create a few accounts in your QB file:

Equipment

Furniture & Fixtures

Leasehold Improvements

Business Start-Up

Fixed Suspense

 

These will all be created as Fixed Asset accounts for the time being.

1. Equipment - All your Kitchen Equipment and POS stuff will go here.  Some people also put the initial buy of plateware, silver, etc. here.  Some create a separate category.

2.  Furniture & Fixtures -- This is just what it sounds like.  How I look at this is:  If you moved out of the space, could you sell it or take it with you?  If so, and it's not equipment, then it's furniture & fixture.

3.  Leasehold Improvements -- This is also what it sounds like, sort of.  If the answer to the question above about taking stuff with you is "no", then it's probably a leasehold improvement.  Stuff like new A/C units, a particular flooring or wall treatment, upgrading roof or electrical.

 

Stuff to remember about 1 - 3:  they are all related to *physical things* AND they should include the immediate non-physical aspects of making those physical things happen.  Thus, the upgraded plumbing isn't just the parts, it's also the labor etc.

 

4.  These are the things about starting your business that aren't so physical:  Incorporation fees, design fees, legal stuff, even initial recruiting/advertising start-up costs.  All these might end up here.

 

5.  This is where you put things when you don't know where they should go.  It's an account you're using to make 100% sure the accountant will review where these things should go.  When they are finished, there should be NOTHING left in this account.  

 

Finally, you aren't an accountant.  You're not expected to know and code everything exactly right -- or at least you shouldn't be!  

 

But here are a few things you can do to make sure it is easy for your accountant to actually REVIEW and correct or approve your choices, rather than just breezing by because they see account names that look correct:

 

FIRST:  Ask your accountant what $ cut-off they would like you to use for classifying the different categories as fixed assets vs expenses.  Often times this might be a different cut-off than the actual tax law because an accountant might like to review everything over a certain amount.

 

THEN:

1.  Take copies of ALL invoices related to any kind of start-up or fixed asset expense.

2.  Take advantage of the QBO or QBD feature of allowing pdf attachments to bills or checks to attach the back-up of all these items.

3.  Utilize the memo fields to actually make a note or two describing what the invoice reflects.  If there are several significant purchases in the total, use a separate line with separate notes for each. 

4.  When you send in/allow access to your data at year end, include a detailed quick report on all fixed asset accounts and send it along with your notice, along with the data --

          *alert them to the presence of the activity in these accounts through the year,

           *remind them that Fixed Suspense isthings you had no idea where to put

            *let them know back-up is attached to the items inside QB

            *request that your accountant review where you've classified things.

5.  Finally, at a time that is convenient, ask that they review their changes in this area with you, so that you can better record things accurately in the future.

 

Please keep in mind, again, you're running a restaurant, not an accounting firm.  Just do your best!  Even mistakes that are consistent are no big deal to correct most of the time.  The best thing you can do is to make it as easy as possible for your professional to find or notice them, and to review and correct them.

 

If you follow the steps above, you'll be ahead on that game.

 

Congrats on the new fridge and oven!

 

Kristen Nies Ciraldo

 

View solution in original post

3 Comments
Level 15

Re: Expenses

the items are not expenses, they are fixed assets which you will depreciate over time.

see your accountant

View solution in original post

Anonymous
Not applicable

Re: Expenses

Hi Nicola,

 

The answer offered is certainly right!  

However, that's also what will happen to those charges at year end and with your accountants help, will be classified, depreciated, and generally accounted for correctly.

However, I'm getting the sense that part of your question is 'where do i put these in the meantime so that my accountant will find them and do their stuff with them'?

 

If I'm right in sensing that, here is what you need to do:

Create a few accounts in your QB file:

Equipment

Furniture & Fixtures

Leasehold Improvements

Business Start-Up

Fixed Suspense

 

These will all be created as Fixed Asset accounts for the time being.

1. Equipment - All your Kitchen Equipment and POS stuff will go here.  Some people also put the initial buy of plateware, silver, etc. here.  Some create a separate category.

2.  Furniture & Fixtures -- This is just what it sounds like.  How I look at this is:  If you moved out of the space, could you sell it or take it with you?  If so, and it's not equipment, then it's furniture & fixture.

3.  Leasehold Improvements -- This is also what it sounds like, sort of.  If the answer to the question above about taking stuff with you is "no", then it's probably a leasehold improvement.  Stuff like new A/C units, a particular flooring or wall treatment, upgrading roof or electrical.

 

Stuff to remember about 1 - 3:  they are all related to *physical things* AND they should include the immediate non-physical aspects of making those physical things happen.  Thus, the upgraded plumbing isn't just the parts, it's also the labor etc.

 

4.  These are the things about starting your business that aren't so physical:  Incorporation fees, design fees, legal stuff, even initial recruiting/advertising start-up costs.  All these might end up here.

 

5.  This is where you put things when you don't know where they should go.  It's an account you're using to make 100% sure the accountant will review where these things should go.  When they are finished, there should be NOTHING left in this account.  

 

Finally, you aren't an accountant.  You're not expected to know and code everything exactly right -- or at least you shouldn't be!  

 

But here are a few things you can do to make sure it is easy for your accountant to actually REVIEW and correct or approve your choices, rather than just breezing by because they see account names that look correct:

 

FIRST:  Ask your accountant what $ cut-off they would like you to use for classifying the different categories as fixed assets vs expenses.  Often times this might be a different cut-off than the actual tax law because an accountant might like to review everything over a certain amount.

 

THEN:

1.  Take copies of ALL invoices related to any kind of start-up or fixed asset expense.

2.  Take advantage of the QBO or QBD feature of allowing pdf attachments to bills or checks to attach the back-up of all these items.

3.  Utilize the memo fields to actually make a note or two describing what the invoice reflects.  If there are several significant purchases in the total, use a separate line with separate notes for each. 

4.  When you send in/allow access to your data at year end, include a detailed quick report on all fixed asset accounts and send it along with your notice, along with the data --

          *alert them to the presence of the activity in these accounts through the year,

           *remind them that Fixed Suspense isthings you had no idea where to put

            *let them know back-up is attached to the items inside QB

            *request that your accountant review where you've classified things.

5.  Finally, at a time that is convenient, ask that they review their changes in this area with you, so that you can better record things accurately in the future.

 

Please keep in mind, again, you're running a restaurant, not an accounting firm.  Just do your best!  Even mistakes that are consistent are no big deal to correct most of the time.  The best thing you can do is to make it as easy as possible for your professional to find or notice them, and to review and correct them.

 

If you follow the steps above, you'll be ahead on that game.

 

Congrats on the new fridge and oven!

 

Kristen Nies Ciraldo

 

View solution in original post

Level 1

Re: Expenses

Thanks for your answer! Nice work!

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