Is it a fixed asset or an expense?
A free check from Church Bookkeeper Academy. Answer a few questions to see whether to capitalize it or expense it, and the entry to record.
Use your church's written policy. No policy yet? Start with the numbers below, then have your board adopt one. There's a sentence you can copy at the bottom of the page.
Your capitalization policy
Capitalize items that cost $ or more each and will be used for more than .
CBA's sample church uses $5,000 and 3 years. Common thresholds are $2,500 and $5,000.
What are you recording?
Pick the closest match.
Tell us about it
Pick what you're recording first.
Include delivery, sales tax, installation and setup. Leave out a warranty or service plan: check that on its own, under software and service plans. Donated? Use what it's worth today (its fair value), not what the donor paid. On a payment plan? Use the price to buy it outright, not the total of the payments.
Test each item on its own. Pieces that only work together, like a sound system, are a project: answer Yes above.
One invoice with an unrelated repair on it too? Split it and check each part on its own. Repairs done as part of an upgrade, like patching and painting after a remodel, go with the upgrade.
Include closing costs: title, legal, survey and recording fees. Donated? Use what it's worth today, from an appraisal.
Use the appraisal. Or use the county's split: if the county values the land at 20% of the total, put 20% of the price here. Only the building is depreciated. Enter 0 if the church already owned the land.
The whole project
Add up every cost for the project: labor, materials, equipment, permits, design and installation. Your best estimate is fine while it's still going. Donated work or materials count at what they're worth.
The project's costs
Fix the amounts in red to get the total.
Donated? Pick "It was donated" in step 3, and use what it's worth today.
For the entry
These don't change the answer. They fill in the entry below.
Expense lines and gifts take a class. Fixed asset lines don't.
How long the church expects to use it. CBA's guide: 5 years for vehicles and tech, 7 for furniture, appliances and HVAC units, 39 for buildings. There's some room to choose.
The entry
Your entry shows up here once the questions are answered.
What to do next
Save a recordOptional
Copy a summary for your files. Nothing here is saved or sent anywhere.
Good to know
Bought several at once?
Test each item on its own. Forty chairs at $150 each is $6,000, but each chair is under $5,000, so the chairs are an expense (6110 Small Equipment & Furniture). Pieces that only work together, like a sound system, are different: they're one project, tested together. Some churches' policies capitalize a big batch of the same item. Follow yours.
Part of a bigger project?
Add up every cost for the project and test the total against your threshold, even when each bill is small. A youth room remodel paid in four bills of $3,500 to $9,000 is still a $24,000 improvement. Hold the bills in Construction in Progress until it's finished, then move the whole project to the asset. "Add it up from a list" gets you the total.
Repair or improvement?
A repair keeps it working the way it already does: patching a roof leak, an oil change, new tires. An improvement makes it better, replaces a major part or changes its use: a whole new roof, a new engine, turning storage space into offices. A big repair is still a repair. Repairs done as part of an improvement go with the improvement.
Already expensed it?
Move it when you catch it: debit the fixed asset and credit the expense account it went to, with the same class it was coded to. Some churches expense big purchases all year and move them at year-end. Either way works while the year is still open. Found it after the year was closed? Ask your CPA. A past year's mistake is fixed through net assets, not this year's expenses.
Donated?
Record it at what it's worth today (its fair value), not what the donor paid, and run it through the same check. Thank the donor in writing: describe the item, but don't put a value on it. A donated car, boat or plane worth more than $500 gets Form 1098-C instead. Volunteer time is recorded only when it builds or improves something the church owns, or it's a professional's skilled work the church would otherwise pay for. If the church signed the donor's Form 8283 and sells the item within 3 years after receiving it, it files Form 8282 within 125 days.
Paying for time?
Leases, subscriptions and service plans pay for time, not for something the church owns, so they aren't fixed assets. When one payment covers several months, it's a prepaid expense: record it to Prepaid Expenses, then move one month to the expense account each month.
Write your policy
A capitalization policy is one sentence your board approves, so every bookkeeper makes the same call. It updates as you change the numbers at the top.
- Common thresholds are $2,500 and $5,000, the same amounts as the IRS's de minimis safe harbor (Treas. Reg. 1.263(a)-1(f)): $2,500 per item, or $5,000 with audited financial statements. That safe harbor is an election on a tax return, which most churches don't file, so treat the amounts as a guide, not a rule.
- Spending federal grant money? The grant's equipment rule applies to what it buys: $10,000 per unit, or your threshold if it's lower, and a useful life of more than one year (2 CFR 200.1). Grants made before October 2024 may still use $5,000.
- Apply it the same way every year, and review it when the board reviews other financial policies.