can they be non-current and current
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In accounting, loose tools can be classified as either current or non current assets depending on how they are expected to provide economic benefits.
Non current loose tools - are used in the business for more than one accounting period (more than 12 months). These include spanners, hammers, screwdrivers, wrenches, electric drills. They are usually recorded as Property, Plant and Equipment but for the purpose of accounting for their depreciation, a separate "Loose tools" account is usually opened if the business has such policy. They are depreciated if they meet the capitalization threshold of the business.
Current loose tools - have a short useful life (less than one year). They are inexpensive and are consumed or replaced frequently. They include small paint brushes used once, cutting blades, drill bits, sanding discs, measuring chalk, disposable utility knives. These are often classified as consumable supplies/stores/inventory after which they are charged to expense or placed under current assets.
In CAMBRIDGE IGCSE ACCOUNTINGÂ
For examination purposes, unless the question states otherwise:
- Loose tools are generally treated as a non-current asset.
- They appear under Non-Current Assets in the statement of financial position.
- If the question indicates they are consumable or expected to be used up within a year, they may be treated as current assets (stores/supplies) with consumed value being written off as an expense in the income statement.
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