User Support Forum

Re Topic :Expense/Asset? that read...We purchased a storage container for $4000. So I posted into Acct's Payable - CR the bank and DB the expense. I was told to make this an asset (Furnishings & Equip) Is the correct enty to DB furnish & Equip (balance sheet) and CR the expense side in acounting via a manual transaction?

You said that this was correct.

My new Question is:
Should I have selected YEAR END Transaction when I did this. The expense was posted in Nov. The manual transfer was posted in Dec.
My Jan-Dec expense report shows we had $4000 less expenses in the year and ofcource my bank account shows the money was taken out of.
Because I did not select Year End Transaction - Now I need to remember when I look at our expense sheet that "don't forget... your expenses for the year really aren't what the report reads, in actual they were $4000 more. How can you have two Inc/Exp reports on file? ...Carey

Short answer - your income and expense report won't show the purchase of an asset.

Here are all the transactions:

purchase item through AP
checking account CR
expense DB

move item to asset
asset account DB
expense CR

You end up with a credit to your checking account and a debit to your asset account. The two expense accounts transactions cancel out.

This is normal, and correct.

The three reports that define an organizations transactions are the balance sheet, the income and expense statement, and the cash flow statement (or Sources and Uses of Cash)

The cash flow statement will catch the purchase of assets, like your storage tank, or the principle paid on a mortgage, etc.

You can usually detect this items by looking for a change in the value of an asset. In your case, the storage tank went from $0 to $4,000 on the balance sheet.