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Fixed assets - physical verification and accounting
Our firm is conducting Fixed assets Physical verification in one manufacturing company (XYZ Ltd). During verification, we find many Fixed assets which are not accounted in books. There are 2 reasons for this.
1) Some assets are constructed within company. Like stores material steel and small spare parts issued and charged to consumable but ultimate fixed asset not accounted.
2) Earlier, xyz ltd sold some fixed assets to ABC Ltd in a deal 10 years ago. That time that ABC Ltd forgot some assets in XYZ Plant location only. Now these assets are property of XYZ Limited only.
We would like to know what should be done for these assets found in physical verification but not accounted in books
Replies (1)
1. As per your explanation , the parts and spares , consumables must be capitalised to the fixed asset a/c if there is an increase in productive capacity of the existing asset or it is certain that the new asset will be of productive use for a periodof more than a year ... If the former is not satisfied , then it is contrary to the accounting standard and hence must be written off to the p/l for better preparation and presentation of financial statements.
2.the property sold to ABC ltd is already not appearing in the books. So better not to charge depreciation on such fixed assets and let the company use those assets without accounting them. .........This is what in practical is the best way according to me. Final decision shall always be yours. Regards .
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