Fixed Assets accruals


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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?
 
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kirby

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DR Fixed Assets
CR Accounts Payable
 
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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

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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

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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.
 
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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)
 
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kirby

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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.)
 
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Werner Reisacher

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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.
 

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