When deciding when to purchase and register capital equipment onyour books, there are two lines of thinking. The first is topurchase and install the needed equipment at a point during theyear where additional volume warrants the expenditure, therebyassuring sufficient cash flow to handle the additional debt serviceor the outright purchase of the equipment. The second method is tohave the equipment purchased and installed at the beginning of thebusiness year or quarter closest to the time when you’ll actuallyneed the equipment, allowing time for training and working out bugsbefore the equipment is placed into full production.
The avenue you choose depends on your cash flow. If you canservice additional debt or purchase the equipment from operatingexpenses, then the latter method works best. If your cash flow istight, then choose the former method. Either way, capital equipmentcosts are accounted for under the heading “capital.”
