Accounting of fixed assets: transactions

Fixed assets (OS) are the property of the company, which is intended for repeated and long–term use in order to make a profit.  

The concept of fixed assets and the main accounting rules are fixed in FSB 6/2020 “Fixed assets”. According to the document, transactions, reports and other documents, as well as transactions that reflect the arrival, write-off, depreciation and modernization of the OS, can be considered as accounting for the OS.

We will tell you more about the accounting of the OS and the transactions of fixed assets in this article.

What you need to know about fixed assets

Initially, the term “fixed assets” and the accounting rules for such objects were fixed in PBU 6/01 “Accounting of fixed assets” and the Tax Code of the Russian Federation. From 2022, instead of the PBU, the new FSB 6/2020 began to operate, which fixed the rules. According to the document, in order for an object to be considered the main means, it must meet certain criteria:

• Will be used by the company for more than a year.
• Not purchased for resale.
• It is not processed in the production process as a raw material.
• Must bring profit to the organization.

Thus, the following objects can be attributed to fixed assets:

• Buildings and structures.
• Equipment: machines, machine tools, computers, etc.
• Office equipment: printers, scanners, etc.
• Cars.
• Communication facilities – power grids.
• Transport facilities – railway junctions, roads.

One of the main criteria for assigning objects to the OS category is the marginal cost. It is important for companies and financial employees to know that it is different for accounting and taxation purposes. So, until 2022, the price of 40,000 rubles was recognized as the marginal cost. If an object costs less than this value, then it was immediately written off and not counted as an OS. After the adoption of FSB 6/2020 “Fixed Assets” and FSB 26/2020 “Capital Investments”, the cost increased to 100,000 rubles. This means that objects that cost less than this value are not put on the balance.

The assignment of various objects to the OS should be treated responsibly. The fact is that the list of assets – fixed assets affects the accounting, taxation and document flow of the company as a whole. Fixed assets will definitely not be capital investments. Also, assets that are being prepared for sale cannot be considered an OS.

The number of operating systems is calculated in inventory objects – accounting units of the operating system. Such a unit can be a single object, for example a computer, or a whole complex of objects, for example a complex machine consisting of several parts, but working as a whole. In the latter case, the main thing is that the subject works in a complex. Each object has its own inventory number and a separate card. In 2012 and earlier, the use of this form was mandatory. Starting from 2013, organizations have the right to develop and approve their own form of inventory card for accounting of operating systems.

For correct work with the OS, it is important to determine the initial cost of the object – the amount of investments made before the recognition of the object as a fixed asset. Capital investments, in particular, include:

• The amount paid to the supplier.
• Payment for delivery.
• Payment for works under construction contracts.
• The price of consulting and information services related to the purchase of an OS.
• Remuneration to the intermediary who helped to acquire the object.
• Customs duties and charges.
• State duty.
• Other costs.

If transactions are made after the OS is accepted for accounting, it is important not to take VAT into account as capital investments. It is also important to know that the initial cost is recorded once and cannot change except in situations where the estimated obligation is taken into account.

Another important characteristic of the OS is the useful life. This is the period of time when the object brings the company income. The firm can determine this period independently.

It is important to know about the existence of a classification approved by the government of the Russian Federation, which divides the OS into groups and sets each the maximum use period. For example, for many office equipment, it is 3 years. As for accounting, companies can decide for themselves whether to use the classification or not. If we are talking about tax accounting, then it is mandatory.

For complex objects consisting of several parts, the useful life for each component may differ significantly. In this case, each part must be considered as an independent OS.

Transactions when taking into account the OS

To accept an object on the balance sheet as a fixed asset, it is important to know its initial cost. More about it was said above.

Fixed assets are accepted for accounting on the date when the cost was formed in full, for tax — when the OS is put into operation.

It is important to make the following entries:

• Debit 08 Credit 60 — acceptance for accounting.
• Debit 19 Credit 60 — incoming VAT is allocated.
• Debit 01 Credit 08 — the initial cost of the OS has been formed.

In case of installation of the object, it is necessary to open the account 07 “Equipment for installation”. This is especially true for construction companies. The document contains data on equipment in need of technological installation, connection to the network and communications, as well as intended for installation on construction sites. After registration of all costs, the amount of the installed OS is debited to the Debit account 08.

In principle, all capital investments for the object should be taken into account in the debit account 08. As a result, the initial cost will be obtained. After accepting the object as a fixed asset, it is transferred to account 01 “Fixed assets” by debit.

It is important to know that there are no specific rules about the period of acceptance of an object to the OS. Businesses can choose when to enter an object into the accounting policy. One of the most common options is after commissioning.

Recall that assets that have a small value are not recognized by the OS. They are recorded for current expenses. These include the office, inventory and other objects necessary for household and economic support.

As for real estate objects, the rights to which are subject to state registration, the object is in any case recognized by the OS if the building is built and capital investments are fully formed.

After taking into account the OS, it is necessary to draw up an act in the form of OS-1 or in its own form.

OS: Depreciation accounting account

Assets from among fixed assets are amortized, that is, they transfer their value to the company’s expenses, gradually. Certain types of operating systems do not require depreciation at all. This applies to objects that do not change their properties over time – land for various purposes, collections, investment real estate.

There are four ways to calculate depreciation:

• Linear. The annual amount of deductions is determined from the initial cost of an object of fixed assets and the depreciation rate calculated based on the useful life of this object.
• The method of the reduced remainder. The annual amount of depreciation deductions is determined based on the residual value of an item of fixed assets at the beginning of the reporting year and the depreciation rate calculated based on the useful life of this object and a coefficient not higher than 3 established by the organization.
• By the sum of the number of years of useful life, in proportion to the volume of production.

Most often, companies use one accrual method for tax and accounting – linear. Depreciation will be the quotient between the initial cost of the OS and the useful life of the OS.

It is important to know that in tax accounting it is necessary to use the linear method, while in accounting you can use any. At the same time, financial employees prefer to work on a linear system to avoid confusion.

Depreciation is accounted for on account 02 “Depreciation of fixed assets”. It is necessary to make monthly debit entries 20 (23, 25, 26, 29, 44) and credit 02.

Depreciation is accrued as soon as the OS is accepted for accounting. The cost of expenses is written off regularly, that is, monthly. The process is terminated from the date of the object’s write-off from accounting (from account 01). However, the company can begin depreciation on the 1st day of the month following the adoption of the OS for accounting, and complete it on the 1st day of the month following the write-off.

Due to depreciation, the book value of the object is formed – the difference between the original cost and the accrued depreciation. It is indicated in the balance sheet.

The main transactions on the accounting of the OS in terms of the restoration of fixed assets

If the OS has been restored, then the initial cost may increase. This is due to the modernization or reconstruction of equipment. Such measures are taken into account in different ways depending on the source of modernization. If the repair is carried out by the contractor, then the expenses are reflected by the debit of account 08 in correspondence with account 60 “Settlements with suppliers and contractors”. In this case, transactions are made: Debit 08 Credit 60 (the cost of the contractor’s work) and Debit 19 Credit 60 (VAT is calculated). If the modernization is carried out independently, then the costs of retrofitting are taken into account on account 08. The following entries are made: Debit 08 Credit 10 (OS upgrade costs).

Here it is important to know that the funds spent on OS repairs are deducted for expenses and accounted for by debit of “costly” accounts. During modernization and reconstruction, the useful life is always increased, as well as the properties are improved. This means that the costs are not written off as current expenses, but increase the initial cost of the object. Depreciation in this case is recalculated based on the increased initial cost and increased useful life.

Legal practice shows that OS accounting is a voluminous sector of work. If you have difficulties explaining the legislation or documenting the transactions, you can contact VALEN lawyers for help. We will help you understand the intricacies of accounting quickly and efficiently.