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Entries for Assets are similar to entries for expense as shown below

 

Entries for Expense Entries for Asset

Expense Dr

   To Party

 

Party Dr

   To Bank

Assets Dr

   To Party

 

Party Dr

   To Bank

    

Fixed Assets means those assets which are used for more than 1 year

Example :-Machine,Building.Plant and Machinery etc)

 

What is the Amount to be Capitalized

Apart from Purchase Price,all expenses of bringing asset to working condition are capitalized

i.e. included in the value of Asset

(Example-Installation Charges,Freight Charges/Accessories etc paid on purchase of asset is put in Asset A/c)

 

 

Treatment of Subsequent Expenditure on Asset after Installation

It it increases efficiency or performance beyond previous level

Captalized (Put in Asset A/c)

Example:-New floor constructed in House 

 

It it maintains efficiency upto previous level

Not Capitalized (But in Repair and Maintenance A/c)

Example::- Whitewash done in House

 

  1. Accounts and Finance
  2. Step 2 Passing Routine Entries
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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