Project equipment: capitalise or expense?
Why a funder's budget and a non-profit's books treat project laptops differently, and how to keep the asset register and funder reports both right.
By Achekam · · 5 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
A health programme's grant budget includes a line for ten laptops and a projector, and the funder expects to see that money spent in the first quarter. The accountant, preparing the annual financial statements, wants the same laptops on the fixed-asset register and depreciated over several years. The programme manager is caught in the middle, worried that one of them must be wrong.
Neither is wrong. A funder's budget reports cash spent on the project; your financial statements report the organisation's assets and the cost of using them over time. The two views can coexist, as long as you keep both. This article explains why they differ, how to record the equipment properly, how to report to the funder on the funder's basis, and the policy that keeps it consistent.
Why the funder's budget and your books can treat the same laptop differently
A grant budget is usually a cash plan: what the funder will pay for, and when. When you buy laptops with grant money, the funder sees the full cost as spent in that reporting period.
Your financial statements follow accounting principles. An item that will be used for more than a year, and that costs more than your agreed threshold, is generally an asset. Its cost is spread over its useful life through depreciation, so each year's statements carry a share of the cost of using it. Investopedia's guide to depreciation explains how an asset's cost is spread over its useful life, with methods such as straight line.
So the same purchase appears in two places:
| View | How the laptops appear |
|---|---|
| Funder's report | Full cost, spent in the period bought |
| Income statement | Depreciation each month over the useful life |
| Balance sheet | Equipment at cost, less depreciation to date |
How the grant income itself is treated against that spending is a related question for your accountant, because it decides whether the grant appears as income all at once or alongside the depreciation.
Adding equipment to the asset register at cost
In Achekam, the fixed-asset register lets a business add assets at cost. For project equipment:
- Register items individually when they are valuable, such as each laptop, vehicle or generator, so you can track who has it and dispose of it properly.
- Use the asset name to link it to the project, for example "Laptop, maternal health project, grant reference", so the register shows which funder paid.
- Record the cost including what it took to get it ready, such as delivery and set-up, but not ongoing software subscriptions.
Each organisation has its own chart of accounts, created when the books open, and accounts can be added, renamed or switched off. If funders want equipment shown separately by grant, add equipment and accumulated depreciation accounts for the main grants, or agree with your accountant to use one equipment account and track the grant in the asset names.
Depreciation posted month by month
The register depreciates assets monthly, by straight line or reducing balance, with a journal each month. Straight line suits most project equipment because it is simple to explain to a board or funder: the same charge every month over the item's life.
When equipment reaches the end of a project, it often stays with the organisation, moves to another programme, or is handed to a partner as the funder directs. The register can dispose of an asset and post the profit or loss, which is how a handover to a partner organisation is recorded in your books.
Achekam does not work out tax wear-and-tear; for most non-profits that matters less, but if you have taxable trading activities, your accountant will deal with it separately.
Reporting to the funder on the funder's own basis
Your funder report and your books will not show the same figure for equipment in a given year, and that is fine. The report follows the funder's budget and the cash spent; the books follow your accounting policies.
To report on the funder's basis without a separate set of books:
- Code the purchase so it can be identified as grant expenditure, through the asset name and the grant's records.
- In the funder report, show the full cost in the period it was bought, as the budget expects.
- Keep a short reconciliation for your own file: grant equipment spend per the funder report, compared with equipment added to the register and depreciation charged.
Achekam lets a business set a budget per account and period and compare it with actual figures from its ledger. That comparison follows the books, so the equipment line shows depreciation rather than the purchase. Keep the funder's cash-based budget tracking alongside it, as described in tracking grant budget against actual.
A capitalisation policy agreed with your accountant
Most of the confusion disappears once the organisation writes down a rule. Agree a short policy with your accountant and adopt it at board level:
- A capitalisation threshold: items below an amount you choose are expensed, even if they last for years. Pick an amount that keeps the register meaningful; there is no single right figure.
- Useful lives by category: computers, furniture, vehicles, generators.
- Method: usually straight line.
- Grant-funded assets: how they are named, and how funder ownership conditions are recorded.
- Disposals and handovers: who authorises them, and how they are recorded.
If a journal is needed to move a past purchase out of an expense account and onto the register, Achekam refuses a journal that does not balance or is dated in a closed month, and a posted journal is corrected only by reversal, which keeps the history of the change visible.
A grant purchase, in words
A literacy charity buys tablets for a reading programme with grant money. The tablets are above the charity's capitalisation threshold, so each is added to the register under the programme's name and depreciated monthly over the agreed life. The quarterly funder report shows the full cost as spent. The finance officer's reconciliation shows the same tablets on the register, with a quarter's depreciation charged, and it goes in the grant file.
Where to start
Agree the threshold and useful lives with your accountant, list current grant-funded equipment, and add anything above the threshold to the register. Where funds are restricted, restricted funds in your chart of accounts shows how to keep them visible in the books.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
