Accounting practices for build-it-yourself boats

I am curious how other folks building their own boats handle the accounting for the project. (Home builders, not commercial yards.)

Do you record every equipment and materials purchase as an expense (a transfer from /current_assets/chequing to /expenses/boat) when you spend the money?

Or do you record these purchases as a transfer from /current_assets/chequing to /fixed_assets/boat, thereby ending up with the completed boat as a fixed asset on your books when it is launched?

Or do you record each expense (as in the first case) but then, on launch day, record a transfer from /expenses/boat to /fixed_assets/boat?

Or do you have some other scheme, perhaps dictated by local accounting principles and tax laws?

 

I just take a container, label it boat building receipts and fill it as I build. When I go to register and title the boat I take them with me as proof that I paid all the applicable state sales taxes on the materials. No problems. I add up the receipts before presenting them to the bureaucrat behind the counter.

 

I think that much is a given, Hoyt... keeping a folder of receipts is pretty much essential unless you like being heckled by tax collectors. (Hey,it's theoretically possible that someone, somewhere does like it.)

I'm curious about how other builders are keeping track of their expenditures and how they record the finished boat on their own books. (If you buy a finished boat outright, for example, it's basically a transfer from /current_assets/ to /fixed_assets/boat and then a series of transfers from there to /expenses/annual_depreciation, but that may not make sense for home building.)

 

I regard the expenditure in the same light as I do the money I spend on booze. Discretionary and it's gone forever.....

But then I live in a country that doesn't have the taxes that the USA does so I don't have to prove just how much I spent on building my boat to avoid taxation later.

Were I in the business of boat building, different story. I'd be recording everything in a spreadsheet or database.

PDW

 

I estimate my budget, double it.
Throw everything in the same shoebox as Hoytedow, ignore it.
Then frantically try to find out why my wifes records have another 100% more cost than I estimated (with the doubling).

This is not a joke.

 

Equipment purchases are typically the cost of doing business and aren't attached to a clients bill, though you can help amortize costs for specialty equipment, by padding the customer's bill with supplies, specific to his project.

Tool time is another matter and is included in billing, but this includes all tools, not just recent purchases. Equipment failures and replacement is just a shop cost and again the cost of doing business.

Parts, supplies and materials are some of the biggest places to get a "margin" in the shop. If you go to a mechanic to have a $100 starter replaced, you'll pay $180 to $220 for that starter. If the mechanic uses 2 paper towels and a couple of pairs of gloves, you'll pay for a whole roll of paper towels and a box of rubber gloves. The same is true in a boat builder's shop, you make your margins where you can, so an inlet fitting to replace the corroded raw water uptake, to his small block might cost $50 and another $30 to install, plus some shop supplies to cover the gloves, paper towels and polyurethane used in the job. You make some on the fitting, more on the supplies and if you're good, some on the labor too.

This may seem anal and offensive, but real businesses conduct themselves like this everyday and stay viable as a result. Most "blend" shop supplies, lumping the amount of towels, gloves, etc. into one column, while sand paper and other tool related supplies into another. Does this mean you count every paper towel? Not really, but you can insure you have covered their costs, with a margin. I've found most boat shops don't keep up with the places they can make a margin, relying on parts, materials and labor alone, which isn't the easiest route.

 

I think that there is a hidden question here. Are you trying to establish a value on the boat for personal ownership reasons? Are you trying to establish a value for your product for profit/loss reasons? Are you being taxed on the value of the product or on your profits.

On the two registered boats that I've built, I've not been ask to give a value or a sales price. I've listed them as homebuilt and that seems to satisfy any sales tax issues. If you are working as a company with a tax ID number and don't pay sales tax on materials, I'm sure it will be a different story.

I've probably missed your point entirely. You might refine the purpose of your accounting.

Cheers.

 

While you may not be responsible for this or that particular tax or fee, your country's overall tax rates are nothing to write home to mom about compared to taxes in the US (which by the way, vary dramatically from state to state).

http://www.nationmaster.com/compare/Australia/United-States/Taxation

 

The jar thing is fine by me but I have had arguments with her indoors as to wether we should include flights and hotels and in my case --shipping.

Is that still the value of the boat or the cost of the boat.

 

Are you asking about folks building a boat as a "hobby" or folks who are or who want to be professional boatbuilders?

Most folks I know do not do detailed accounting of their personal and household expenses. But there are those who do. One person I worked with attempted to track ever cent which passed through his household. He even accounted for estimated savings in household utilities and grocery purchases when on vacation.

 

Main component purchases are filed (in the same binder with datasheets etc) nothing much recembling accounting thou I remember so far how much everything was. Tools and other things not added to costs bcs I use them also for other projects.
BR Teddy

 

Exactly the same as Hoyt.

Maybe you need to speak with an accountant.

 

Toms in a very bad mood today. Some one or something has took the jam out of his do nut thats for sure.

 

Quite true, Australia does have high taxes.

However, fortunately, the concept of 'personal property tax' doesn't exist. Long may it stay that way.

PDW

 

I guess each juristition has its own rules. Typically for a small home built craft , authorities need to know that you paid the local sales tax on the skifffs BOM plus outboard motor. Keep these reciepts to prove tax paid.


For big boats you should see Pro advice . Many times registration tax is based on the value of the finished product. What is the value. ?