If we purchase any fixed assets and insurance is paid for it thru bank then we capitalize it and entry we pass is:
fixed assets a/c dr
to seller a/c
then what we pass for insurance payment thru bank is it this
seller a/c dr
to bank a/c
Nehas (Al) (425 Points)
14 September 2009If we purchase any fixed assets and insurance is paid for it thru bank then we capitalize it and entry we pass is:
fixed assets a/c dr
to seller a/c
then what we pass for insurance payment thru bank is it this
seller a/c dr
to bank a/c
Darshit
(CA Final)
(964 Points)
Replied 14 September 2009
i think that this entry needs to be modified.
The entry should be
FA dr
To Seller
and than
Insurance d/r
to Bank.
FA d/r
to Insurance
(Last entry if at all this needs to be capitalized)
Ratan Deep Saxena
(Asstt Manager (Accounts & Finance))
(2998 Points)
Replied 14 September 2009
darsh*t is correct. Fixed asset is capitalised with Value of Fixed assets+ cost of insurance.
Amol Gopal Kabra (CA,CS,DISA)
(Practicing CA)
(8539 Points)
Replied 30 October 2009
Darsh*t is right.
Alternatively the entry can be passed as below.
Fixed Asset Account Dr. (Cost + Insurance)
To Supplier (Cost)
To Bank (Insurance)
And when you repay the creditor for capital asset,
Supplier A/c Dr.
To Cash / Bank
bhuvana
(Accounts)
(150 Points)
Replied 31 October 2009
yes, darsh*th is rite...ratan ji's explanation makes it more is clear. exps made for new asset before being put to use, shud be added to the FA value.
srinivas
(Dyputy Manager)
(32 Points)
Replied 31 October 2009
All are depends our terms with Seller, If we insist to pay him on our name your entry is correct. Other wise, It must be Dr to Insurance a/c to Bank then FA to Insurance ok.
Originally posted by :Neha
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" | If we purchase any fixed assets and insurance is paid for it thru bank then we capitalize it and entry we pass is: fixed assets a/c dr to seller a/c then what we pass for insurance payment thru bank is it this seller a/c dr to bank a/c |
" |
CA Anshu Agarwal
(B€ @LW@¥$ ]-[@Pp¥)
(1832 Points)
Replied 31 October 2009
insurance is an expenditure of revenue nature. in any case it shuold not be added to the cost of asset.
if terms with seller provide for payment of insurance premium to seller and seller shall get the asset insured than follwoing entry should be passed:-
Fixed asset Dr. (cost)
Insurance expenses Dr. (insurance premium)
To seller/ cash / bank (total amount)