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Business Income vs. Expenses Report not accurate

Harvey Randall

I'm using Windows Classic Business and Personal. I bought a piece of equipment from my Checking account and set-up a Business Asset account to track its value. I categorized the Checking transaction using one of my business expense categories. In the Asset account I entered a transaction as an opening balance equal to the cost of the equipment. The problem I'm having is that the Income vs. Expenses report sees that transaction as uncategorized income, which is incorrect. It correctly sees the expense transaction in my checking account, but there is no income whatsoever involved with this transaction. How can I fix this?

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[Deleted User]

@Harvey Randall the increase in the asset account is not income per se, it is the value of your equipment. Your equipment expense is offset by the value of the equipment initially. You are taking an expense and capitalizing it. Over time you equipment asset will depreciate and decrease in value, and you would recognize that as depreciation expense.

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[Deleted User]

@Harvey Randall in the Asset account, change the opening balance category (self-transfer) to an income category appropriate for the equipment purchase.

Harvey Randall

Hi CaliQkn,

The equipment purchase really is an expense, not an income item. In my Checking account, I have already categorized the purchase as an expense and the report correctly picks that up. The issue appears to be what the report is seeing in the Asset account. If I make the opening balance category of the Asset account an income item as you suggest, then the report nets it out against the corresponding expense amount from the Checking account and results in an overall "zero" for the transaction. I don't see how that can be correct from an accounting standpoint. If all my business assets are considered "income", then my books would never show any of the expenses spent to acquire the assets.

[Deleted User]

Harvey Randall

Yes, I definitely want to capitalize the equipment and plan to setup a depreciation schedule for it. In playing around with the report I see that it does recognize a decrease in value as an expense which I can categorize as "depreciation". So, going back to your suggestion, I suppose I could also create an "appreciation" income category to set the initial value equal to the cost of the equipment. I still don't like the fact that the report sees increases in the asset as income, which it is technically not, but I can probably live with that. My concern is that other reports like Profit & Loss will be skewed because of that treatment. I'll wait and see.

I want to thank you for this discussion. Your expertise on this subject is awesome and has helped me tremendously!

[Deleted User]

@Harvey Randall you are welcome. You can use a category such as "Fixed Assets" to establish the initial value of the equipment asset account. I think then it would be looked at as an increase in fixed assets rather than actual income.