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Treatment of demolition of building

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sumathy sundararajan

Manager Finance and Accounts

27 Points Posted on 10 September 2012

Hi friends,

I have a doubt in accounting this_

A pvt limited company has acquired a land along with a building from a firm in the month July 2011. It has demolished the building before 31st march for constuction another building, now how should I value the fixed asset on 31 march? How should I account the demolition cost?

Regards,

Sumathy

Replies (1)

Bhaskar Unnikrishnan CPA CMA

Accounts / Administration

303 Points Posted on 10 September 2012

There may be two scenarios:

Domolition as Land Cost: If the existing building was decided to be useless or no intention to use, at the time of acquisition of land the demolition cost can be capitalised to Land cost.

Demolition as Building Cost: If the existing building is demolished to build new building, the cost of such demolishion can be capitalised to new building cost.