Definition of Capital Equipment

 Capital or Inventorial Equipment can be defined as items

Items that meet the following criteria are considered to be capital or inventory equipment: have an acquisition cost of $5,000 or more, including but not limited to the costs of tax, freight, and installation;

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  • are not disposable or consumable;
  • are stand alone;
  • has a useful life that is at least one year long;
  • qualifies as a tangible physical property (can be appraised for value).

Purchases in bulk of identical or similar pieces of equipment and/or furniture may be deemed investments in capital equipment but are not considered inventory purchases when the following dollar thresholds are reached:

  • $15,000 for bulk (like) equipment
  • $30,000 for bulk (like) furniture

It does not matter how much the new piece of equipment costs; it must be considered a capital purchase if it will increase the value of an existing piece of inventory equipment or lengthen the amount of time it can be used. The total amount paid for the new equipment will be added to the value of the existing equipment.

The cost of the software that is included with the purchase of hardware is not taken into consideration when determining whether or not it may be capitalised and is therefore considered part of the capital acquisition. The cost of individual software purchases, as well as development expenditures, licence fees, and maintenance costs, should be expensed if their total worth is less than $5,000. However, acquisitions of software such as those discussed in this article that have a value of $5,000 or more ought to be regarded as capital purchases.

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