What is Equipment Expense

I already told that we purchase equipment for lots of purposes in company and it is different from purchasing of machinery. Today, we are discussing, what is equipment expense or what are equipment expenses? Main expense of equipment is of purchasing of equipment. It is capital expenditure because we purchase equipment for using purposes more than one year instead of trading purposes. Some time, we get equipment on rent or rental basis, at that it is also our equipment expense. But it will be little difficult for us whether we should show it in balance sheet as capital expenditure or show it in income statement as operating expenses. This can be decided on following basis.

1. # If  company gets equipment on lease basis and rental installment  is paid annually basis, it should be showed in balance sheet as capital expenditure.

2. # If some equipment is consumed within one year and its monthly rent can be shown in income statement as operating expenses.

Some time, we have to repair the equipment, at that time, it will be also equipment expenses. It is shown in income statement. Annual depreciation on equipment is not expense but it is loss. But because profit and loss has two side, one is expenses and other is income, so we show depreciation in expenses side because effect of expenses and losses are same on income. Both reduce the income of business.

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Accounting Education: What is Equipment Expense
What is Equipment Expense
Accounting Education
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