Capital assets are what your business owns that help you make money. This article will explain how to recognize a capital asset and enter it into Wave.
What defines a capital asset?
A capital asset is an asset that can be used for over a year; most businesses, no matter how small, own some kind of capital asset. They’re used in a business to generate revenue and aren’t purchased for resale. Computers, furniture, machinery, vehicles, and buildings are all examples of capital assets.
When you add an asset for your business, you can create a new account for each asset - like “Computer,” “Printer,” “Desk” - or you can create an account for each type of asset - like “Equipment” and “Buildings.” Whichever method you choose, add a new account by navigating to Accounting > Chart of Accounts > Assets, and then in the “Property, Plant & Equipment” subcategory, create the account you need.
How to Record the Purchase of a Capital Asset in Wave
There are three ways to record the purchase of a capital asset in Wave:
If you have a Wave Bill for the asset:
- Head to Purchases > Bills, and create a Bill.
- Select the vendor and add an item. In the Expense Category dropdown to the right of the Item name, find the asset account you added and select it.
- Enter the rest of the information on the Bill.
- Click Save.
If you purchased the asset with a bank or credit card account:
- Head to Accounting > Transactions, and either select your bank-imported expense, or select Add expense.
- Enter a description of the asset, select the payment account you used to purchase it, and in the Category box, scroll down to the Asset accounts, or start typing the account name in the search box.
- Select the asset account and apply sales tax as necessary.
- Click Save.
If you purchased the asset personally and are transferring it to your business:
- Head to Accounting > Transactions > More (top right corner), and then Add journal transaction.
- Add a description of the asset in the description field and select the date you are starting to use it in the business. Under the debit column, change the Category to the asset account, and enter the purchase amount or value of the asset.
- Under the credit column, make the Category Owner’s Investment / Drawings (if you're a sole proprietorship or partnership) or Loan from Shareholder (if you're a corporation), and enter the same amount.
- Click Save.
You're all set! You've now recorded a capital asset into your business records. If you need to record depreciation of that asset, click right here to learn how.
If you require further assistance with recording asset purchases or returns, we recommend reaching out to an accountant or bookkeeper. Wave also has a team of in-house bookkeepers and accounting coaches that can help with your accounting. Learn more about Wave advisors here.