yasaswi gomes 25 July 2020
The amounts recoverable is very low. It is 5% on capital expenditure and 5% on capital employed. Once it is amortised and written off from operating profit through COS, the owners equity reduces. There is no treatment for a director to draw the recovered 5% amount. That recovered amount will be within the owners equity under retained earnings. However, since owner is legally entitled to profits, one can draw that recoverable amount from profits in which will impact the drawings account. He can withdraw more as well, but liquidity risk could arise.