A small retail business with a turnover of £20,000 p.a. has recently purchased the following items for use in the general office:

Required:

(a) Explain which (if any) of these items would be treated as fixed assets (capitalized) and which as expenses of the year concerned.

(b) What is the consequence of the decision to capitalize or expense?

(c) Can you offer the business any general rules to guide them in their decision?

Transcribed Image Text:

Item Cost Expected life (years) Filing cabinet Stationery 140 5 180 11 Pencil sharpener 15 5 Desk 80 8 Chair 30 8 Typewriter 160 5 Dictaphone 70 5 Tapes for dictaphone 12 2