The recent global health crisis, brought about by the COVID-19 pandemic, has altered numerous sectors, including the equipment hire industry. As projects adapt and requirements shift, the landscape of equipment rentals has experienced significant transformations.
How the Pandemic has Reshaped the Landscape of Equipment Rentals
Post-COVID, the equipment hire industry saw a rapid shift in demand. Lockdowns and restrictions led to an increased requirement for specific rental services, particularly those that support remote work and limited on-site personnel.
For example, Car rental services witnessed fluctuations as many people refrained from using public transportation, opting for personal vehicles to maintain social distancing.
Additionally, with an increase in localized projects and home renovations, there was a noticeable uptick in Trailer hire and Truck rental. Many individuals, avoiding public transport, chose to rent a truck for transportation of goods or shifting purposes.
In the construction sector, Construction equipment hire became essential, especially for companies hesitant to invest capital in equipment during uncertain times. The demand for specific machinery, like Mini excavators, Scissor lifts, and kubota excavators, saw significant growth.
Landscaping projects also witnessed a boom, given the rising trend of home gardening during lockdowns. Consequently, Landscaping equipment and lawn equipment rentals, including lawn mower hire, saw a spike in demand.
The Rising Demand for Specific Equipment Types Amidst Changing Project Needs
While some equipment types saw an increase in demand, others became essential for new, pandemic-induced requirements.
Traffic Control equipment, including Traffic Signs and VMS Boards, became increasingly vital as cities implemented new traffic patterns, testing sites, and vaccination centers.
Similarly, with the growing emphasis on health and safety, many construction sites and public places started employing additional safety and informational mechanisms, thus driving the need for Site services rentals.
Forklift hire saw a significant boost, especially in warehouse environments. With the surge in e-commerce due to pandemic-induced shopping behaviors, warehouses required additional forklifts to manage increased product movement.
Understanding Equipment Hire in Financial Terms
Equipment is integral to the functioning of many businesses, offering the tools and machinery needed to produce goods, offer services, or execute specific tasks. However, when we delve into the financial realm, it’s essential to understand how equipment is classified and treated in accounting. Below, we address some frequently asked questions:
1. What Type of Expense is Equipment?
Equipment is typically considered a capital expense. When a business purchases equipment, it doesn’t expense the full cost immediately on its income statement. Instead, the cost of the equipment is capitalized and depreciated over its useful life. This process involves spreading out the expense of the equipment over several years, reflecting its usage and wear and tear.
Thus, instead of seeing a single, large expense in the year of purchase, you’d see smaller depreciation expenses over the equipment’s useful life.
2. What Type of Asset is Equipment?
Equipment is categorized as a tangible long-term asset on a company’s balance sheet. Being tangible means it’s a physical asset, and its long-term nature implies that the company expects to use it for more than one accounting period (typically more than a year). As the equipment is used over time, its value decreases due to depreciation, which is recorded as a depreciation expense on the income statement and reduces the asset’s carrying amount on the balance sheet.
3. What is Considered Equipment?
Equipment encompasses a wide range of tangible assets used by businesses to carry out operations. This includes machinery used in manufacturing, computers and office furniture in an office environment, vehicles used for business purposes, or any other tangible asset that a company uses in its operations and expects to utilize over an extended period.
From the Truck hire for transporting goods to the Scissor lift used at construction sites or the lawn mower hired for landscaping work, these are all considered equipment. They differ from supplies or inventory items, which are used up or sold within a year.
What Type of Account is Equipment?
Equipment is recorded in a fixed asset account on a company’s balance sheet. Specifically, it falls under the “Property, Plant, and Equipment” (PP&E) account. The initial cost of the equipment is recorded as a debit to the Equipment (or similar) account and a credit to Cash or Accounts Payable, depending on how it was acquired.
Over time, as the equipment is depreciated, the accumulated depreciation (which is a contra asset account) will increase, reducing the book value of the equipment.
In essence, understanding how equipment is classified in financial terms is essential for accurate accounting and financial reporting. Whether it’s about recognizing the expense associated with an Excavator Hire for a specific project or categorizing a newly acquired kubota excavator as a long-term asset, a clear comprehension of these classifications ensures that businesses reflect their financial health accurately.
