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Financial Accounting for Local and State School Systems: 2009 Edition
NCES 2009-325
June 2009

Appendix E—Criteria for Distinguishing Equipment From Supply Items — Reasons for Distinguishing Between Supplies and Equipment

Education agencies have found it useful to distinguish between supplies and equipment for the following reasons:

  • The distinction may assist in deciding how to control or keep track of an item. For example, some funding programs require that all equipment items be inventoried annually. At the same time, many school districts will inventory certain items regardless of whether the items are equipment or whether they are required by law to do so.
  • The distinction may bear on insurance decisions. Supplies and movable equipment are usually insured as part of the contents of buildings, whereas built-in equipment is usually insured as part of the structure.
  • The distinction is important in identifying the funds with which to purchase a given item. For example, some funds, such as bond funds, typically cannot be used to purchase supplies, while other funds might exclude the purchase of equipment.
  • The distinction can affect calculations of cost of operations and cost per student. Although most school districts include expenditures for supplies when calculating current operating costs, many school districts treat equipment differently. Some include all expenditures for replacement equipment in the current operating cost total, excluding the cost of new and additional equipment. Others prorate the cost of all equipment over several years. In both cases, the incorrect classification of supplies or equipment items can affect the resulting cost calculations.
  • The distinction can affect the amount of state or federal aid allocated to a school district. Several funding sources use per student costs as part of their funding formula (see the preceding paragraph). Most funding programs limit the ways in which their funds may be spent, sometimes excluding either supplies or equipment from the list of eligible purchases.

A school district can take the following two basic approaches to distinguish between supplies and equipment in the decisionmaking situations just mentioned:

  • Adopt a predetermined list of items, classifying each entry as either a supply or an equipment item.
  • Adopt a set of criteria to use in making its own classification of supply and equipment items.

Each approach is discussed in the following text.

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