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- | == Status of this Document ==
| + | <h1>Amortization Expense</h1> |
- | This procedure was reviewed and accepted by the lead auditor, {{member|Susanna MacGarva}}, 2016-01-29.
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- | | + | |
- | == Procedures ==
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- | === Fixed Assets ===
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- | Any purchase of $500 or over for an asset that will not be used up in one year is placed in a Fixed Asset account.
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- | An account is created for the category, if one does not already exist.
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- | If the individual items in a single purchase are less than $500, but the total purchase is $500 or over,
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- | they will be treated as a fixed asset if the items are to be used together.
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- | For instance, if 3 GPS were to be purchased at $300 each, they would be considered a fixed asset.
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- | But a single GPS at $300 would not.
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- | In some cases, this practice has not been applied to purchases in previous years.
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- | PCSAR will continue to use the categories as is, without attempting to adjust for previous years.
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- | Any fixed assets purchased within the year should be booked against a fixed asset account.
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- | Often there's already an account for that type of item (e.g. GPS's),
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- | but if not, create a new account for the new type of equipment.
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- | === Supplies ===
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- | ''This section added 2020-02-23 and has not been reviewed by an auditor.
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- | Supplies are items that are consumed in the process of the organization doing its work.
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- | | + | |
- | Supplies are not Fixed Assets and so should not be capitalized. Instead they are expensed at the time they are ordered.
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- | This applies even if a large inventory is ordered that will be consumed over several years.
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- | | + | |
- | Uniforms (e.g. SAR hats and shirts) are technically considered Fixed Assets (capital cost allowance class 12).
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- | But they are depreciated 100% in the first year -- with no half-year rule applying.
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- | This is the same way expenses are handled.
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- | So they can be treated as supplies.
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- | ([https://www.taxtips.ca/smallbusiness/businessexpenses.htm taxtips.ca], {{link|Image:Members:2020-02-23 TaxTips.ca re uniforms.pdf|cached}})
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- | | + | |
- | === Amortization Expense ===
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| | | |
| PCSAR follows Canada Revenue Agency’s [http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html Classes of Depreciable Property guidelines] when depreciating assets. | | PCSAR follows Canada Revenue Agency’s [http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html Classes of Depreciable Property guidelines] when depreciating assets. |
| Assets are depreciated at the specified percentage each year. | | Assets are depreciated at the specified percentage each year. |
| 50% of the stated rate is used for assets that are purchased within the financial year. | | 50% of the stated rate is used for assets that are purchased within the financial year. |
- | '''Depreciation is done on the declining balance.''' I.e., the balance at end of the year is taken and used to calculate depreciation.
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| | | |
- | Example:
| + | As of 2015-08-31 fiscal year end, PCSAR classifies its equipment as: |
- | * Satellite Phones $5000.00 depreciated value at start of the year. (This can be found on the previous year's balance sheet.)
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- | * purchased one more during the year for $1,000.00
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- | * Add the $5,000 and 1/2 of the $1,000.00 = $5,500.00 at 20% = $1,100.00 in depreciation which would be booked at the end of the year.
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- | | + | |
- | Credit the depreciation account for the specific piece of equipment and debit the Amortization Account.
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- | | + | |
- | As of the 2015-08-31 fiscal year end, PCSAR classifies its fixed assets as: | + | |
| * Class 8 (20%) | | * Class 8 (20%) |
| ** The majority of PCSAR's assets | | ** The majority of PCSAR's assets |
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| ** Storage Cabinet: "furniture" | | ** Storage Cabinet: "furniture" |
| * Computer: Class 46 (30%) | | * Computer: Class 46 (30%) |
- | * Sierra Command Post: Class 10 (30%) | + | * Sierra Command Post: Class 10.1 (30%) |
- | ** Because initial cost was not over $30K, cannot be Class 10.1
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| * Pickup Truck: Class 10 (30%) | | * Pickup Truck: Class 10 (30%) |
- | * [[Equipment Shed]]: Class 6 (10%) | + | * Equipment Shed: Class 6 (10%) |
| ** "made of ... corrugated metal" and "the building has no footings or other base supports below ground level" | | ** "made of ... corrugated metal" and "the building has no footings or other base supports below ground level" |
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- | === Write off ===
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- | When the declining balance of an account is less than $50, the entire balance will be written off.
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