Fixed Assets accruals

[Mader]

If we have situation when there are goods received but invoice not received – for fixed assets – should be make an accrual for it (as this is BS and not IS items). How to treat them?

 

[kirby]

DR Fixed Assets
CR Accounts Payable

 

[Mader]

I assume CR should be Accrual account ?

DR Fixed Assets
CR Accounts Payable

I assume CR should be Accrual account ?
OK, but is it common to accrue CAPEX? What about depreciation? Should it be also somehow accrued?

 

[kirby]

Yes, Accounts Payable is the accrual account

You received the equipment so a liability to pay for it needs to be accrued.

Depreciation starts when you place the equipment into service.

 

[Werner Reisacher]

I further suggest, that for records and easier reference sake, you attach a copy of the purchase order to the accounting document that you use as a voucher for the book entry.

 

[Mader]

Thank you for the answers.
The reason why I asking is that in my company we exclude CAPEX from accruals and just wondering why...
I was also wondering if we should acccrue only cost of depreciation for one period (as the cost will be spread for some of periods)

 

[kirby]

One reason for exclusion of CAPEX purchases from the accrual process is that the person doing the accruals might only be looking at month-to-month EXPENSE fluctuations and not aware of equipment purchases.
You do not decide to "accrue" (as a decision) depreciation expense. You record it starting in the month the equipment was placed in service. (But this is probably just semantics.)

 

[Werner Reisacher]

Yes, Kirby, a lot of it has indeed to do with semantics, when it comes to answering accounting/tax questions to people at different levels of experience. Therefore, I often use the words "it depends" as a request for additional information in order to enable me to give a tailor-made reply.