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Editorial Board on Accounts and Audit
  • Capitalisation of Fixed Assets

    by CHANDRA on Friday, August 23, 2019 at 05:37 PM

    Dear Sir, We have purchase an items which is capitalised in the Books of accounts in the Year 2017-18 but such material now will used in manufacture of FG as Raw material. Now we have to transfer the same from Capital to Revenue. KIndly share with us accounting implication like Journal entries and its impact on the Financial Statement

    Replied byEditorial Board Tuesday, September 03, 2019 at 07:54 PM

    Para 68A of Ind AS 16, Property, Plant and Equipment provides that when an item of property, plant and equipment is transferred to inventories, it shall be valued at its carrying amount on the date of transfer. Such transfer results only change in classification of item from property, plant and equipment to inventories. The accounting entry shall be:-

    Inventory A/c - Dr.
    To Property, plant and equipment A/c

    Accordingly, in your case, transfer of materials from property, plant & equipment to inventories shall not create any financial impact on the financial statement of the company. In this case, the materials shall now be classified as an item of inventories in the financial statements.

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