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Join nowLast year we renovated an office on our farm. I paid the contractors from our bank account (via a check sent by the bank) and paid for materials via credit card. Each of the expenses came in on the QBO bank feed for the bank or CC. I added each of these expenses under the capital category in the chart of accounts, but this has made it so that the balance sheet shows the capital equity as negative instead of positive. Should I have filed all the purchases as expenses and, if so, what do I need to do in order to make the capital improvements show as positive equity on my balance sheet?
Thank you
renovations to an office are not capital improvements, they are expenses
A capital improvement is something that changes the footprint of the building, or extends its useful life significantly. A new roof as an example. For a new roof you would create a new fixed asset account as a sub account of the fixed asset, then that new account would depreciate at the same interval as the parent account does.
Thanks Rustler. My use of "renovation" may not have been appropriate. The work on the building did extend its useful life (new roof, walls, utilities) so I created a new "buildings" fixed asset charge type in the chart of accounts for fixed assets, then made a subaccount "accumulated depreciation" to track the depreciation. Last year, we put a new roof on a second building, so I'll make another subaccount for that building to add those charges. Do these actions sound appropriate?
When I switch the category of the transactions from "capital" to these new fixed equity subaccounts, is this going to make the improvements show up as positive equity on the balance sheet? My accountant looked at my balance sheet and quickly pointed out that I should not have a negative number for the capital.
Thanks again!
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