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student007 · Feb 2, 2006, 05:31 PM

Some companies have an asset account called "Renovations". If renovations should be considered an asset, then shouldn't repairs of capital assets be as well? I'm asking this because my textbook puts repairs immediately in the expense account.

CaptainForest · Feb 2, 2006, 07:55 PM

Repiars are simply to keep a current asset in working condition.

Renovation is a totally new design, additional which adds extended life to the asset.

So if the assets had a useful life of 5 years, repairs would still keep it at 5 years, but a Renovation would increase it to 8 years (or whatever).

mh34 · Feb 5, 2006, 07:04 AM

Originally Posted by student007

Some companies have an asset account called "Renovations". If renovations should be considered an asset, then shouldn't repairs of capital assets be as well? I'm asking this because my textbook puts repairs immediately in the expense account.

When you extend the useful life of an asset, it's called capitalization. You are adding to the asset. That's why its an asset.

Repairs are like Captain Forest said. It just keeps the asset in working order and doesn't extend the useful life, and therefore, it's expensed.

Jade · Feb 6, 2006, 04:22 AM

Repair are expenditures used to restore assets to good operating conditions upon their breakdown or replacements of broken parts. There are two kinds of repairs (1) EXTRAORDINARY repairs which are material replacement of parts, involving large sums and will normally extend the useful life of the asset. Such expenditures are usually CAPITALIZED or included as part of Fixed Asset or Property plant and equipment. The (2) is ORDINARY REPAIR which are minor replacement of parts, involving small sums and are frequently encountered. These are normally charged to expense when incurred.

mh34 · Feb 6, 2006, 05:28 AM

Originally Posted by Jade

Repair are expenditures used to restore assets to good operating conditions upon their breakdown or replacements of broken parts. There are two kinds of repairs (1) EXTRAORDINARY repairs which are material replacement of parts, involving large sums and will normally extend the useful life of the asset. Such expenditures are usually CAPITALIZED or included as part of Fixed Asset or Property plant and equipment. The (2) is ORDINARY REPAIR which are minor replacement of parts, involving small sums and are frequently encountered. These are normally charged to expense when incurred.

I totally believe it is always good to give information that is relevant to the situation. However, it's obvious that this student is in the first year of accounting and has not covered the more advanced categories of repairs. If you read the question you would have noticed that she pointed out in her textbook that repairs are expensed. Therefore, I tried to give her an answer based on what she is learning. Information overload was unnecessary in this situation.