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Queen's University
 

Financial Services

Clarification of Usage of Account Groups 612xxx versus 614xxx

This memo is to offer clarification about the appropriate use of account groups 612xxx and 614xxx. This application is intended for transactions originating and being recorded within Operating, Ancillary, Research, Trust and Endowment Funds.

Account group 614xxx has been created to aid in the preparation of financial statements at year-end. This group of accounts helps to identify purchases of items to be recorded as capital assets for financial reporting purposes opposed to those recorded through 612xxx accounts which remain as expenses.

614xxx accounts are intended to record purchases of separate identifiable pieces of furniture and/or equipment costing in total greater than $10,000 that have a useful life in excess of one year. This criterion is to be applied to each single item purchased and not intended to capture aggregate costs in excess of $10,000 for invoices with multiple items or volumes of equipment/furniture.  Account group 612xxx for non-capital furniture and equipment purchases exist for recording these items.

Please review the following examples. If any further questions or clarification is needed, please contact Martin Galczynski at extension 74613 or martin.galczynski@queensu.ca

Example 1
A generator is purchased that will be used for multiple years with a total cost of $15,000. This item would be recorded within the appropriate 614xxx account because it has a useful life greater than one year and cost exceeding $10,000. If the item will only have a useful life of less than one year, this item should be recorded within a 612xxx account.

If under this scenario, the generator cost was $9,000, regardless of whether the useful life extended beyond one year, the purchase should be recorded utilizing the appropriate 612xxx account.

Example 2
A motorized machine is purchased that will be utilized for multiple years. The machine is invoiced (either on the same invoice or two separate invoices) where the machine body is a separate listed item valued at 3,000 and the related motor is valued at 8,000. The body and motor needs to be combined to achieve the desired function of the machine and therefore together represent a single identifiable piece of equipment with a total cost of $11,000. As such, this purchase would be recorded utilizing the appropriate 614xxx account.

Example 3
An invoice is received for multiple items. Listed as purchased items are 250 chairs valued at $50 a unit and 20 desks with a unit price of$100. The subtotal of the invoice is $14,500. The items will be used for multiple years. Although, the invoice is over the $10,000 threshold and the items will be utilized for a number of years, the items purchased are all each separate pieces of identifiable furniture with either a $50 or $100 unit value.  As such, the appropriate 612xxx account should be utilized.

Example 4
A computer server is purchased that will be used for multiple years. The total quoted price is given as $20,000. Based on payment terms, 25% is due up front with the remaining due upon delivery. The first invoice is received for the $5,000 down payment. Since the total purchase meets the criteria for utilizing the 614xxx account group, usage extends beyond one year and cost is greater than $10,000, the down payment should be recorded within the appropriate 614xxx account so that when the remaining invoice is billed and recorded, the total cost is recorded within the same account.

Kindest Regards,

Queen's Financial Services

Kingston, Ontario, Canada. K7L 3N6. 613.533.2000