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General Accounting Discussions: Accruals for Capital Expenses

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    • CommentAuthormalnahar
    • CommentTimeSep 10th 2009
     
    I understand that we can accrue the operational expenses such as wages, interest etc when I incur these expenses in the current accounting period but for which I do not have an invoice and still am obliged to pay my vendors in future accounting period for these expenses.

    My question, can we apply the same rule for Capital Expenditure, example, consultancy fee to civil engineers and designers? is it GAAP to accrue capital expenditure?

    Thanks
    • CommentAuthorArcSine
    • CommentTimeSep 11th 2009
     
    Yes, a liability should be established in the same period in which the engineers and designers provide their services, even if they haven't yet furnished you with an invoice by the end of that period. Once they've done their work in compliance with the agreeement, the liability exists.

    If their services were in conjunction with the creation of long-term asset (capital expenditure), then the debit side of that accrual entry would be to the asset account.
    Thankful People: malnahar
    • CommentAuthormalnahar
    • CommentTimeSep 12th 2009
     
    Many thanks ArcSine, appreciate your help

    Best regards

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