Machinery and Equipment

Code: 1213
👁 Views: 54

Account Information

Financial Statement Statement of Financial Position
Normal Balance Debit

Definition

Cost of machinery and equipment used in operations

Note: This account may be broken down into sub-ledgers as needed (e.g., customer/supplier/bank names or branches).

Common Journal Entries

Purchased new machinery

Dr. Machinery and Equipment
Cr. Bank Account

Recorded machinery depreciation

Dr. Depreciation Expense
Cr. Accumulated Depreciation Machinery

Machinery maintenance expense

Dr. Maintenance Expense
Cr. Cash in Hand

Disposed of old machinery

Dr. Accumulated Depreciation
Dr. Loss on Disposal
Cr. Machinery and Equipment

📐 IFRS vs US GAAP Accounting Treatment

IFRS IAS 16 Property, Plant and Equipment
US GAAP ASC 360 Property, Plant and Equipment

❓ Frequently Asked Questions

Q: What is the difference between machinery depreciation and machinery maintenance?

A: Depreciation is a systematic allocation of the machine\'s cost over its useful life and does not represent an actual cash outflow. Maintenance is an actual expense paid to keep the machine in good working condition and is recorded as an expense in the period it occurs.

Q: How is the purchase of new machinery recorded?

A: The purchase of new machinery is recorded with the entry: Dr. Machinery and Equipment (for the purchase cost including transportation, installation, and customs duties), Cr. Bank Account or Accounts Payable (for the same amount).

Q: What is the useful life of machinery and equipment?

A: The useful life of machinery varies by type and intensity of use, but typically ranges from 5 to 15 years. The useful life is determined by management estimate, manufacturer specifications, and the maintenance policy followed.

Q: What is the accounting entry for selling old machinery at a gain?

A: When selling old machinery at a gain, the following entry is recorded: Dr. Bank Account (for the sale proceeds), Dr. Accumulated Depreciation - Machinery (for total accumulated depreciation), Cr. Machinery and Equipment (for the original cost), Cr. Gain on Sale of Assets (for the difference).