Expensing a laptop

Hi..

Whether to depreciate a particular asset or not, I decide based on the volume of monthly revenue earned as well as based on the value of the asset purchased. In your case, Laptop is valuing $1500 only. You can simply treat as Office Supplies. You can debit Office Supplies and Credit Loan from Shareholders (because paid from personal funds).

I am of the strong opinion that there is no point in creating Asset account and depreciating it every year. This lengthens the list of assets unnecessarily in your Balance Sheet, and in the event of Sale of Business, you get to allocate the sale price to each such small value asset. If asset is valuing >$10000, I would definitely depreciate it.

Thanks, Arpan.

Annual Sales are in excess of $200K, so do you any issues with expensing the full $1500 (instead of $ 900 for 60% business use) as office supplies?

Also, instead of crediting "Loan from Shareholders" (because paid from personal funds), can I credit "Owner's Equity" instead? 

@Ron_1004 

Any part of personal use is not deductible.  So, you should only deduct $900.  If you don't plan on having the S-corp. reimburse you for the cost of the laptop, create a journal entry: debit Computer Expense/Office Supplies, etc., and credit your Shareholder Contribution account (not Owner's Equity).  Credit Loan to Shareholder only if you plan on reimbursing yourself.  The expense account you choose is up to you.  Owner's Equity is not appropriate for S-corps, use your Shareholder Contribution equity account.  You do not need to capitalize (record as an asset) any fixed asset purchase that exceeds $2,500.  It's known as the 'IRS de minimis capitalization threshold'.  It's an administrative convenience for small businesses making small purchases.     

@Rainflurry 

Thanks for the detailed response.

The business actually is a single member LLC with an S Corp election. Does that change anything between using “Owners Equity” or “Shareholder Contribution Equity” account to account for my purchasing the laptop using personal funds.

@Ron_1004 

The IRS considers you a shareholder, but because you're an LLC, you're technically a member.  It can be recorded as Shareholder Distribution or Member Equity.  Owner's Equity is not correct, technically.  However, since you're a single-member LLC with an S-corp. election, either Shareholder Distribution or Member Equity will work.  I would just be consistent until tax time and then let your CPA/tax accountant guide you on how they prefer it be recorded.