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R
Ron_1004
December 3, 2023
Question

Expensing a laptop

  • December 3, 2023
  • 1 reply
  • 28 views

I purchased a laptop for $ 1500 in 2023. Estimated use 60% for my consulting business (an S Corp) and 40% personal use. Can I show $ 900 (60% of $1500) as an expense in 2023 under my S Corp? Or can I even expense the entire $1500 since I use it more than 50% for my business.

Is it okay to classify this as an Office/General Administrative expense in QuickBooks - if not, what expense category should I use? I paid for this using my personal funds, so what are the accounting entries I should use for this in QuickBooks Online for my S Corp?

1 reply

A
Arpan11
December 4, 2023

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.

    R
    Ron_1004Author
    December 4, 2023

    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? 

    Rainflurry
    Rainflurry
    Level 11
    December 4, 2023

    @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.     

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