What expense category does equipment come under?

Equipment falls under the "Capital Expenditure" or "Fixed Assets" category, providing long-term value to the business.

Understanding equipment in accounting

To handle equipment expenses properly, it's essential to know how they're categorized and managed in accounting.

Equipment is recorded as a fixed asset. This classification ensures that it appears on our balance sheet and is capitalized, with the cost being spread over its useful life. As a noncurrent asset, equipment represents a long-term investment that will not turn into cash within a year. Consequently, these assets are a clear signal to investors that we are committed to growth and stability.

Is equipment an expense?

Equipment is not immediately expensed. Instead, it is capitalized and depreciated over time, which helps match the expense with the revenue it helps generate. However, smaller or less expensive items might be expensed right away based on your company’s expense policies.

But the nice thing about higher-quality equipment is that it's capitalized and expensed over its useful life, which can be three, five, even ten years. This has a major benefit for our bottom line.

Is equipment on the income statement?

The cost of the equipment doesn’t show up on the income statement. Instead, you see the depreciation expense, which evenly spreads the equipment's cost out over its useful life, giving a more accurate picture of the company's financial performance.

How is equipment arranged on a balance sheet?

Equipment is listed as noncurrent assets on the balance sheet, usually within the "Property, Plant, and Equipment" (PP&E) section. This amount includes the cost of the equipment and the accumulated depreciation. The net value of the equipment is a signal of how much value it still has to the business.

What type of equipment falls under assets?

Typical examples of equipment assets include:

• Copy machines
• Computers
• Telephones
• Production line machinery
• Medical scanning equipment

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