How to Manage Lump-Sum Purchases of Assets | QuickBooks Canada Blog (2024)

FAQs

How do you record lump-sum purchases? ›

Allocation of lump sum purchase price: The lump sum purchase price is divided across the acquired assets based on their respective fair market values relative to the total market value of all assets. This allocated cost becomes the cost at which the asset is recorded in the company's books.

As a result of this a business can depreciate the value of the asset for the day-to-day wear and tear associated with the use of the asset. They are most often in the form of equipment, property, and plant. Other fixed assets include computer equipment, software, furniture, machinery, and vehicles.

Examples of tangible assets include cash and cash equivalents, property and land, furniture, raw materials, and inventory. Intangible assets include items such as shares, copyrights, patents, and trademarks.

To record the purchase of a fixed asset, debit the asset account for the purchase price, and credit the cash account for the same amount. For example, a temporary staffing agency purchased $3,000 worth of furniture.

The cost of fixed assets, such as computers, cars, and office buildings, is recorded on the general ledger as the asset's historical cost and not expensed in full against earnings in the current accounting period. These costs are said to be capitalized, not expensed."

Property used for personal uses, inventories, and assets retained for investment purposes cannot be depreciated. You can't depreciate assets that don't lose value over time – or that you aren't using to generate income right now. Coins, art or mementos are examples of collectibles. Bonds and stock as investments.

Import QuickBooks FAM information into Fixed Asset modules. From the Accountant menu, select Manage Fixed Asset. Select Create a New Fixed Asset Manager client, then OK and Next twice. Enter the date, then select Next.

How do I categorize a vehicle purchase in QuickBooks? ›

Physical assets may not be considered fixed if they do not last for more than a year. Disposable items and paper goods, for example, are physical items that would not be considered fixed assets because they do not last for more than a year.

Bottom Line. Since an asset is cash or something that can be converted to cash, a checking account is considered an asset as long as it has a positive value. If your checking account is overdrawn, you owe your bank or credit union money, which makes it a liability.

A lump-sum purchase, also known as a basket purchase, occurs when a company or an individual buys multiple assets together for one single, combined price. This kind of purchase often happens when buying a business, where the price paid is for a combination of assets such as buildings, land, equipment, and inventory.

March 15, 20173 min read. A lump-sum purchase occurs when you purchase assets in a group at once for a single price. With this type of transaction, the sales report or receipt doesn't detail the price you pay for each individual item. Instead, these documents just note the lump sum cost.

Key Takeaways

A lump-sum payment is an amount paid all at once, as opposed to an amount that is paid in installments. A lump-sum payment is not the best choice for everyone; for some, it may make more sense for the funds to be annuitized as periodic payments.

A lump sum payment is often associated with a single amount paid to acquire a group of items. For instance, a corporation might pay $50,000 for the inventory and equipment of a small manufacturer that is going out of business. The transaction did not specify any further details. The $50,000 is a lump sum payment.