Assets & Equipment Glossary
Plain-English definitions for the key terms you'll encounter when working with assets and equipment in your Canadian business.
Amortization
The accounting process of gradually reducing an asset's book value over its useful life. Recorded periodically (usually at year-end) by your Mesa CPA bookkeeper in QBO. The accounting amortization schedule may differ from the CCA rate used for tax purposes.
Book Value (Net Book Value)
An asset's original cost minus the accumulated depreciation recorded against it. Represents what the asset is worth on the Balance Sheet — not necessarily its market value.
Capital Cost Allowance (CCA)
The Canadian tax system's equivalent of depreciation. The amount you can deduct from taxable income each year for the wear and tear on business assets. Calculated using CRA-assigned classes and rates, claimed on your corporate tax return. See: What Is CCA (Capital Cost Allowance)?
CCA Class
A category assigned by the CRA that groups similar types of assets and sets the annual deduction rate. Each class has a different rate (e.g., Class 8 equipment at 20%, Class 50 computers at 55%). Assets in the same class share a pooled Undepreciated Capital Cost (UCC) balance.
Capitalized
Recording a purchase as a Balance Sheet asset rather than immediately expensing it on the Profit & Loss. Assets above a certain value threshold that will be used for more than one year are capitalized and depreciated over time.
Finance Lease (Capital Lease)
A lease arrangement where the lessee effectively takes on the risks and rewards of ownership. The leased asset is recorded on the Balance Sheet as an asset, with the corresponding obligation as a liability. Monthly payments are split between principal and interest.
Fixed Asset
A long-term tangible asset used in the business for more than one year — equipment, vehicles, computers, furniture, buildings. Also called capital assets or property, plant and equipment (PP&E).
Gain on Disposal
A taxable gain that arises when you sell an asset for more than its book value. For tax purposes, any proceeds above the asset's UCC may trigger CCA recapture.
Half-Year Rule
A CRA rule that limits CCA claims to half the normal annual amount in the year an asset is acquired, regardless of when it was purchased during the year.
Immediate Expensing Deduction
A federal tax measure available to Canadian-Controlled Private Corporations (CCPCs) and other eligible businesses that allows full deduction of the cost of eligible depreciable property in the year of purchase, up to $1.5M annually. Effectively replaces CCA for qualifying assets in the acquisition year.
Leasehold Improvement
A renovation or modification made to a leased space by the tenant. Recorded as a fixed asset (not an expense) and depreciated over the lesser of the lease term or the asset's useful life. Falls under Class 13 for CCA purposes.
Operating Lease
A lease agreement where you pay to use an asset without taking on ownership. Lease payments are recorded as an operating expense. Common for office space, vehicles, and equipment rentals.
Recaptured CCA
Income triggered when the proceeds from selling an asset exceed the UCC balance in that asset's CCA class. The recaptured amount is added to your taxable income in the year of sale.
Terminal Loss
A deduction available when you dispose of all assets in a CCA class and the UCC balance remains positive. The remaining UCC is deductible as a terminal loss against income in the year of disposal.
Undepreciated Capital Cost (UCC)
The remaining tax value of a CCA class — the original cost of all assets in the class, minus all CCA previously claimed and the proceeds from any disposals. Future CCA deductions are calculated on the UCC balance.