What Is A CAPITAL ASSET and why do you need to track them separately for accounting?
What is a capital asset? Did you know, you need to track this separately and provide these details to your accountant?
Expensing these items can result is tax reassessments.
definition
A capital asset is a purchase which gives a lasting benefit or advantage. The useful life of this purchase exceeds one year and is not intended for sale in the regular course of the operations.
Why is it tracked separately
A capital asset is treated differently for accounting and tax purposes. The asset is expensed over the course of its useful life to help match the asset with the revenue it generates over the same time period.
Once the asset no longer provides value to the company or is disposed of, this must be reported to CRA separate from the annual profit and loss statement. It is very important to develop a system to track the capital assets and review this annually.
EXAMPLES
A few examples of common capital assets:
Computer
Vehicles
Trailers
Equipment
Office furniture
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