How to measure the cost/value of an Asset in the Financial Statement

Question

I am currently working on my own Financial Statements.

I have several blogs and derive considerable income from it then i decided to put all the assets and liabilities in the books.

My problem is how do i record my asset which is the Computer and my iPad.

I bought the two devices from my blog earnings. I am also using those devices for personal use.

The cost of Computer is $1,000 and for the iPad $875.

should i record it for the whole amount? A friend of mine suggested that it should be recorded half of the price because im not purely using those devices for blogging.

Answer 1

I suggest that you use your own judgement on this. You can assign a reasonable percentage since it is impossible to monitor the hours using those assets. Example: 40 personal and 60 for business. It's really your call.

I also suggest that you should be conservative on valuing the assets. Record the assets at it's lowest value. This is one of the most difficult scenarios in making your own financial statements.

You can also use this approach, i will record the assets at its original cost then use a higher depreciation rate or double declining method of depreciation. If the assets have a depreciation rate of 20% per year (useful life of 5 years), i will make it 30%. the other 10% will add more expense and helps you not to overstate your Financial Statement.

You can also use the residual value of the asset, but if you do this, you should figure out the reliable amount.

I understand that this is not for tax reporting purposes. Therefore, there's no harm if you overstate your Financial statement. And even if you overstate, you can still adjust the cost of the asset. Along the way (in the middle of the year or year end), you will figure out the cost of the asset if it's over valued once the financial statement is done.

Answer 2

Does the friend fix your electrical wiring and the engine of your car? If you need a professional advice - ask a professional. In this case - an accountant (not necessarily a CPA, but at least an experienced bookkeeper). Financial Statements (official documents, that is) must be signed by a public accountant (CPA in the US) or the principle (you). I wouldn't take chances and would definitely have an accountant do that.

You need to consider the asset useful life, and the depreciation. The fact that you use it for non-business purposes may be recorded in various ways. One that comes to mind is accounting as a supplement for depreciation: You depreciate the percentage that is used for business, and record as a distribution to owner the rest (which is accounting for the personal use). This way it would also match the tax reporting (in the US, at least).

Bottom line: if you're preparing an official financial statement (that you're going to submit to anyone other than yourself) - get a professional advice.