Renovation cost RM 100,000 (invoice receipt)
50% Complete (Paid)
50% next year only complete

Should i?

1) Debit Fixed asset RM 100,000
Credit bank RM 50,000
Credit Sundry creditor 50,000

or

2) Debit Fixed asset RM 50,000
Credit RM 50,000

Next year

Debit Fixed asset RM 50,000
Credit RM 50,000


May i know which FRS it comply?
I refer to PPE din mention at all.

Dude, 1st entry is correct.

Some say not an answer

Upon receipt of invoice:
Dr PPE RM50,000
Dr Prepayment RM50,000
Cr Creditor RM100,000
Accounts Payable entry

Upon (first) payment:
Dr Creditor RM50,000
Cr Bank RM50,000
Accounts Payable entry

Upon completion of works:
Dr PPE RM50,000
Cr Prepayment RM50,000
JOURNAL VOUCHER ENTRY

Dr Creditor RM50,000
Cr Bank RM50,000
Accounts Payable entry

This post has been edited by Pink Spider: Oct 1 2014, 04:46 PM

Dr. CWIP RM100,000
Cr. Creditor RM100,000

Dr. Creditor RM50,000
Cr. Bank RM50,000

when finished

Dr. PPE RM100,000
Cr. CWIP RM100,000

U mean second method.. Not an prepayment lah. -.-''

and your 1 is first method?
May i know which FRS?

This post has been edited by tstan8_8: Oct 1 2014, 04:53 PM

Strictly speaking, the balance RM50K is not a liability until the works are done.

But, if u are using a proper accounting software's Accounts Payable module...u receive an invoice for RM100K...u gotta key in full invoice amount straight away. So, u treat the balance RM50K as a prepayment. Else, what u wanna call it?

I tot prepayment is we paid in advance?
Call it WIP?

In your balance sheet, the prepayment and creditor amount will set off each other mar

And in this case, receiving invoice RM100K when only RM50K work is done, the balance RM50K is like a...advance billing lor. Prepayment is just another name u can call it

If the renovation TOTAL cost is not really that big relative to your balance sheet...your auditor might even allow u to capitalise the whole lump sum straight away. That's what I do, anyway...

This post has been edited by Pink Spider: Oct 1 2014, 05:16 PM

ohh.. understand the prepayment assumption.

My total cost already 98% of my total fixed asset. (subsidiary comp only)
is that any FSF show we have to capitalise 50% of Renovation first then capitalise another 50% after completion? because it need to summit to bursa.

Pink Spider is correct except for the prepayment part. 1st thing to do is to reject the invoice for RM100k and ask them to invoice only for the part completed which is RM50k.

You do not owe the contractor 50k now since they have not completed the job. So you should not show a liability to the creditor.

And you do not have a prepayment of 50k since you did not prepay anything.

And to add: you can park the paid 50k as either CWIP or Asset in Use depending on whether the part completed can be used on its own or not.
If cannot use without the balance being completed, then put into CWIP. And in order to start to depreciate your asset, it must be both ready to use and in use.

Aiyo, pls go read the standard lar FRS116.


This post has been edited by jdgobio: Oct 1 2014, 05:45 PM

+100

If this is significant, by right they should not have INVOICED the whole amount.

Do a quotation.

Submit claim/invoice for work done to-date, and u pay it.

Simple and clean.

Oh ya, and u classify it as asset work-in-progress. You don't start depreciate it until the whole work is done, unless u can identify the works separately e.g. RM50K billed is for 1st floor, balance is for 2nd floor for which no work is done yet. Then u will capitalise RM50K as PPE and start depreciating.

If u wanna do it proper, you gotta disclose the balance RM50K as contracted renovation works, disclose in the notes to the financial statements.

This post has been edited by Pink Spider: Oct 1 2014, 05:46 PM

But the invoice have state how many % completion and the remaining balance need to pay after completion.

Thank For your help.. I understand ..