{"id":5195,"date":"2014-12-19T06:17:40","date_gmt":"2014-12-19T04:17:40","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=5195"},"modified":"2014-12-13T06:18:27","modified_gmt":"2014-12-13T04:18:27","slug":"recognizing-a-payable-for-a-ppe-item","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/recognizing-a-payable-for-a-ppe-item\/","title":{"rendered":"Recognizing a payable for a PPE item"},"content":{"rendered":"

How would you recognize a payable for a property, plant and equipment item? You essentially bought from your supplier an item you\u2019ll be using for a longer period to either produce something or generate economic benefits for your business and now you have to recognize the purchase within your accounts.\u00a0<\/p>\n

Say for our example that you acquired a car for 10,000 CU which you haven\u2019t paid yet. Your accounting entry would be something as follows:<\/p>\n\n\n\n\n\n
#<\/strong><\/td>\nDebit-Credit<\/strong><\/td>\nAccount name<\/strong><\/td>\nAmount\u00a0<\/strong><\/td>\n<\/tr>\n
1<\/em><\/td>\nDebit<\/em><\/td>\nProperty, plant and equipment (Machinery subgroup if applicable)<\/em><\/td>\n10,000<\/em><\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\nCredit<\/em><\/td>\nPayable to suppliers<\/em><\/td>\n10,000<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Whilst the above was rather straightforward, what if you also made a prepayment for the purchase earlier? Say that from this 10,000 CU you had already prepaid 2,000 CU. In such a case you\u2019d make the following entries:<\/p>\n\n\n\n\n\n\n
#<\/strong><\/td>\nDebit-Credit<\/strong><\/td>\nAccount name<\/strong><\/td>\nAmount\u00a0<\/strong><\/td>\n<\/tr>\n
1<\/em><\/td>\nDebit<\/em><\/td>\nProperty, plant and equipment (Machinery subgroup if applicable)<\/em><\/td>\n10,000<\/em><\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\nCredit<\/em><\/td>\nPrepaid property, plant and equipment\u00a0<\/em><\/td>\n2,000<\/em><\/td>\n<\/tr>\n
\u00a0<\/em><\/td>\nCredit<\/em><\/td>\nPayable to suppliers<\/em><\/td>\n8,000<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

If you make a prepayment for a\u00a0Property, plant and equipment\u00a0<\/em>item, you\u2019d recognize the prepaid amount within the\u00a0Property, plant and equipment<\/em>\u00a0group on the balance sheet (your initial accounting entry is Db\u00a0Prepaid property, plant and equipment<\/em>, Cr\u00a0Cash and cash equivalents<\/em>as you\u2019re actually paying money). Once you\u2019re actually buying the item, this prepayment is credited and you debit the actual item group in full (in our example you credit the prepayment for 2,000 CU and debit the group the asset belongs to for 10,000 CU).<\/p>\n

As for the payable amount, since from the total cost of 10,000 CU you\u2019ve already paid 2,000 CU, you\u2019re only liable for an additional 8,000 CU.<\/p>\n","protected":false},"excerpt":{"rendered":"

How would you recognize a payable for a property, plant and equipment item? You essentially bought from your supplier an item you\u2019ll be using for a longer period to either produce something or generate economic benefits for your business and now you have to recognize the purchase within your accounts.\u00a0<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[80],"tags":[],"class_list":["post-5195","post","type-post","status-publish","format-standard","hentry","category-2-10-purchases-and-payables"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t