Assets or expenses???

In my opinion the expenses shud be capitalised to Fact Bldg & depreciation to be claimed.  As the matching concept principle would get distorted by expensing these exp to P&L.

I THINK IT DEPEND ON THE AMOUNT OF EXPENSES, IF AMOUNT IS NOMINAL THEN TREAT AS REPAIR AND MAINTANCE

BUT IN CASE OF HEAVY AMOUNT WITH PROPER PERMISSION OF RELEVANT DEPARTMENT (IN INDIA PERMISSION NEED FROM FACTORY INSPECTOR) IT GOES TO FIXED ASSETS

Thanks to Members for their valuable suggestion,

Yes, the amount is big, around 2 Million Ethiopian Birr...so I also think it should be treated under FA.

Regards

BY ALL MEANS IT SHOULD GO UNDER FIXED ASSET SIR BUT NOT IN CONSTRUCTION IN PROGRESS

THE HEAD IS WIP ( WORK IN PROGRESS) AND ADD IT TO FACTORY BUILDING LIKE THIS

FACTORY BUILDING = SUM

+ WIP                           =SUM.

TOTAL                        = SUM

UNDERSTAND OK BY.

Yes Sir Mr. Atul Ji,

You are absolutely right but here in Ethiopia the term "Construction in progress" is being used instead of "Work in progress" as in India. Thanks anyway. :) 

Dear Ajay,

amount is not at all a deciding factor for capitalisations Vs. the expense out decision. You need to see whether it is an asset or not? In case any expense gives enduring benefits, which lasts for more than a year, it is to be trated as an asset. What accountant should do, he should put all expenses under the head " CWIP- Building" till the asset is ready to use. Once the asset is ready to use amount will be transfered from CWIP to Asset (Office Building) account and then based on the governing law there or accouting policy as being followed by co. dep will be charged.

Hope it clarifies.

expenses incurred for constrution of building amount has to transfer to fixed asset a/c. until completion of such building no need of calculating depreciation.

assest or any expenses always have debit balance ? never assest or expenses have negative ..........

1. Fixed assets shall be shown in financial statements at historical cost less depreciation. 

2. What is Historical cost: The historical cost consists of the following:  

a. Purchase price.                                                                    

b. Import duties and other non-refundable taxes. 

c. Cost of bringing the asset to the working condition like: Site preparation, Delivery cost, 

Installation cost, Expenditure incurred on test runs less income by sale of products, 

Administrative overheads specifically attributable for construction/ 

acquisition/installation.  

d. Reduce Govt. grants received/receivable against fixed assets. 

Dear Ajay,

As u said building still in construction so, as per my view it should be shown under Capital Work in Progress (CWIP).