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Hi - I have a rather specific double entry query on a transaction at work that I can't get my head round, was hoping for some thoughts from fellow accountants!
Let me set the scenario here - I'm talking about our general ledger (balance sheet) and our fixed asset register. Normally, when we purchase an asset, it is coded/costed to a suspense code on the general ledger. I then check the legitimacy of that asset (to confirm that it is indeed an asset and can be capitalised) and move it to the fixed asset register.
The process of adding it to the FA register also moves it from the suspense account and onto a fixed asset balance sheet code, as follows:
Item purchased for 5k - DR suspense account (code 9006) CR payables code
Movement of item to FA register has the following double entry:
CR suspense a/c
DR fixed asset additions a/c
So the suspense a/c is clear, the cost is added to the FA additions B/S code, and the FA register records an asset
This is where it gets confusing. We had a fire at a property we own and claimed on the insurance for this, receiving insurance monies as usual (we needed to install a new kitchen and claimed back the cost of this)
Now, I have to add the kitchen as an asset as normal, however the insurance receipt is throwing me out:
The charge for the new kitchen is coded to insurance control (code 9138 - a debit) (normally a kitchen invoice would go to the suspense a/c but it can't in this instance)
The monies for the kitchen are paid to us by the insurance company - code 9138 - a credit. So code 9138 is clear at the end of the period - the cost of the supplier invoice is matched by the insurance receipt.
However - by adding the kitchen as an asset to our register, I am creating a double entry as normal:
DR FA additions (9001)
CR Suspense a/c (9006)
This leaves me with a credit balance on my suspense a/c and I dont know where I can move it to! I can't move it to FA additions as this will mean a reduction in my asset balance, which would be incorrect (plus code 9001 should agree with the value on my FA register - and it won't if I credit that code)
Any ideas how this can be treated? Hope I've explained it well enough and apologies for the length of post!
Let me set the scenario here - I'm talking about our general ledger (balance sheet) and our fixed asset register. Normally, when we purchase an asset, it is coded/costed to a suspense code on the general ledger. I then check the legitimacy of that asset (to confirm that it is indeed an asset and can be capitalised) and move it to the fixed asset register.
The process of adding it to the FA register also moves it from the suspense account and onto a fixed asset balance sheet code, as follows:
Item purchased for 5k - DR suspense account (code 9006) CR payables code
Movement of item to FA register has the following double entry:
CR suspense a/c
DR fixed asset additions a/c
So the suspense a/c is clear, the cost is added to the FA additions B/S code, and the FA register records an asset
This is where it gets confusing. We had a fire at a property we own and claimed on the insurance for this, receiving insurance monies as usual (we needed to install a new kitchen and claimed back the cost of this)
Now, I have to add the kitchen as an asset as normal, however the insurance receipt is throwing me out:
The charge for the new kitchen is coded to insurance control (code 9138 - a debit) (normally a kitchen invoice would go to the suspense a/c but it can't in this instance)
The monies for the kitchen are paid to us by the insurance company - code 9138 - a credit. So code 9138 is clear at the end of the period - the cost of the supplier invoice is matched by the insurance receipt.
However - by adding the kitchen as an asset to our register, I am creating a double entry as normal:
DR FA additions (9001)
CR Suspense a/c (9006)
This leaves me with a credit balance on my suspense a/c and I dont know where I can move it to! I can't move it to FA additions as this will mean a reduction in my asset balance, which would be incorrect (plus code 9001 should agree with the value on my FA register - and it won't if I credit that code)
Any ideas how this can be treated? Hope I've explained it well enough and apologies for the length of post!