What is a Business Asset?
A business asset is something valuable that’s owned by the company. There are different types of assets, but the one encountered the most is a physical asset like a piece of equipment or a building.
So what’s the threshold between an expense and an asset? Some say $500, some say $1200. A good indicator is whether the answer is “yes” to the following questions:
· Does the item contribute to your company making money?
· Is this item something that can be used long term (several years+)? If so, it should probably be listed as an asset. However, it will steadily lose value over time (depreciation). This means that at the end of every month, you should be adjusting its value to account for that loss. Once its value has depreciated down to zero, or if you sell it (and gain or lose money from the sale), it needs to be disposed of so that it is no longer being considered on the books.
Even if the answer to these questions is yes, if the value is under $500, the item should generally be expensed.