Does Office Furniture Go on an Income Statement?
Office furniture consists of furnishings and other items that make a corporate workplace ready for occupancy and use. Companies generally review their furniture expenses as part of real estate strategies, focusing on how to efficiently furnish occupational premises and save money. Corporate logistics and premises managers generally coordinate office furniture purchases.
An income statement is an accounting report that indicates whether a company is winning the economic competition in the marketplace. This report also provides insight into products and services that are strategically important for the company's long-term success. To calculate net income, financial accountants subtract expenses from revenues. Expenses are charges that an organization incurs through its operating activities. Examples include costs of materials and general expenses, such as shipping, insurance, rent and utilities. Noncash items, such as depreciation expenses, also decrease corporate net income. Through depreciation entries, companies allocate asset costs over several years. Revenues include earnings from sales, commissions and gains on short-term investment products, such as stocks and bonds.
Office furniture is a balance sheet item and is neither an expense nor a revenue account. Consequently, financial accountants don't report office furniture on the income statement.
To record office furniture purchases, a corporate bookkeeper debits the office furniture account and credits the vendors-payable account. If the purchase is a cash transaction, the bookkeeper credits the cash account. In accounting terminology, crediting cash, an asset account, means reducing corporate funds. The opposite journal entry is true for furniture sales: Debit the cash account and credit the office furniture account.
Accounting norms require a company to record office furniture as a short-term or long-term asset, depending on the length of time the furniture serves in corporate operations. A short-term asset is a resource that a company can convert into cash within 12 months. If the office accessories are for a temporary use, accountants indicate them as current assets. They record the accessories as long-term assets if the company will use them for more than a year.
Accounting and financial specialists may provide guidance in financial reporting matters, especially if a firm's furniture inventory is vast. Specialists, such as certified management accountants and certified public accountants, help companies report accurate data in accordance with regulatory standards. These standards include U.S. Securities and Exchange Commission rules and generally accepted accounting principles.
Large multinational companies that have a large inventory of office accessories generally use state-of-the-art technological tools to keep track of these accessories and ensure accurate reporting. These tools include database management system software, asset management programs and document management software. Other applications include financial analysis software and information retrieval or search software.