Is this entry ryt

A/c entries 891 views 7 replies

Nehas

425 Points Joined March 2009

If we purchase any fixed assets and insurance is paid for it thru bank then we capitalize it and entry we pass is:

fixed assets a/c dr

to seller a/c

then what we pass for insurance payment thru bank is it this

seller a/c dr

to bank a/c

Replies (7)

Darshit

CA Final

964 Points Joined December 2008

i think that this entry needs to be modified.

The entry should be

FA dr

To Seller

and than

Insurance d/r

to Bank.

FA d/r

to Insurance

(Last entry if at all this needs to be capitalized)

Ratan Deep Saxena

Asstt Manager (Accounts & Finance)

2998 Points Joined May 2009

darsh*t is correct. Fixed asset is capitalised with Value of Fixed assets+ cost of insurance.

Abhay

123 Points Joined September 2009

Darsh*t is right

Amol Gopal Kabra (CA,CS,DISA)

Practicing CA

8639 Points Joined April 2009

Darsh*t is right.

Alternatively the entry can be passed as below.

Fixed Asset Account Dr. (Cost + Insurance)

To Supplier (Cost)

To Bank (Insurance)

And when you repay the creditor for capital asset,

Supplier A/c Dr.

To Cash / Bank

bhuvana

Accounts

151 Points Joined May 2008

yes, darsh*th is rite...ratan ji's explanation makes it more is clear. exps made for new asset before being put to use, shud be added to the FA value.

srinivas

Dyputy Manager

32 Points Joined October 2009

All are depends our terms with Seller, If we insist to pay him on our name your entry is correct. Other wise, It must be Dr to Insurance a/c to Bank then FA to Insurance ok.

Originally posted by :Neha

If we purchase any fixed assets and insurance is paid for it thru bank then we capitalize it and entry we pass is:
fixed assets a/c dr
to seller a/c
then what we pass for insurance payment thru bank is it this
seller a/c dr
to bank a/c

CA Anshu Agarwal

B€ @LW@¥$ ]-[@Pp¥

1832 Points Joined March 2009

insurance is an expenditure of revenue nature. in any case it shuold not be added to the cost of asset.

if terms with seller provide for payment of insurance premium to seller and seller shall get the asset insured than follwoing entry should be passed:-

Fixed asset Dr. (cost)

Insurance expenses Dr. (insurance premium)

To seller/ cash / bank (total amount)