My company (Company X) acquired an asset by way of a loan from another company (Company Y). Company Y purchased this asset for use of by Company X and settled the original supplier invoice on behalf of Company X. This invoice was issued to Company Y in June 2016, therefore this company claimed the VAT input on the purchase. The asset was brought into use by Company X on the purchase date, June 2016. Company Y has now (Feb 2017) invoiced Company X for the asset at the cost price inclusive of VAT (is this correct?). I would like to find out the following:
I'll record the asset into the books of Company X at June 2016 (Debit: Fixed Asset and Credit: Loan - Company Y). The asset was available for use at this date and therefore I will account for depreciation at the full cost of the asset (inclusive of VAT). Then when the supplier invoice is issued from Company Y to Company X, I will record a journal entry to reverse the loan: Debit: Loan - Company Y and Credit: Fixed Asset and then record the supplier invoice received from Company Y (Debit: Fixed Asset, Debit VAT Input and Credit Supplier) or rather just record the supplier invoice to the Loan account - Company Y (Debit: Loan - Company Y and Credit: Supplier Y and then Debit: VAT Input and Credit: Fixed Asset). My question is regarding the VAT implications and the value of the asset for depreciation purposes. The VAT input on the asset will only be recognised on the supplier invoice received from Company Y, therefore from June 2016 to Jan 2017 the asset will be depreciated at the cost inclusive of VAT, then at February 2017 a journal must be passed to Debit: VAT Input account and Credit: Fixed Asset account to record the VAT on the asset. From February 2017 the value of the asset will be at realised at the exclusive of VAT value in the records and depreciation will then be calculated at this value. Is the above correct? In the Asset Register - Would I have a line item for an adjustment to the cost price of the asset? Thank you!
Replies (14)
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Certainly not at this time on a Friday. I might return after 11 and post a response befitting the quality of the question.
Nobody is suggesting that this is not a question for an accountant.
But the usual policy in relation to lay people seeking professional advice is for them to DAMNED WELL PAY FOR IT!
What is the purpose of this forum then??
It is a forum for accounting and finance professionals. You do not seem to be either. Or maybe you are. I couldn't read your OP.
I am a first time user - EDUCATE ME
See above. This is not a forum for freeloaders.
Or perhaps raise your fees, seeing as you are seeking remuneration. I only seek assistance, not malicious responses.
I think you mean that you seek *free* assistance. c.f. my comment above about being a freeloader. And a poorly punctuated one at that.
If you want professional advice with a professional attitude, go find a professional - the definition of which is someone who gets PAID to do what you want them to do.
This is a forum for accounting professionals not a forum for non-accountants to learn basic bookkeeping. You should talk to your company accountant. It is quite common for people to get upset and aggressive when they receive advice on what they should do. They don't like being told they should pay for accounting advice.
I would just take the asset into your books at the date the VAT invoice was issued to you.
You are chronically overthinking, and making something really quite simple appear unnecessarily complicated.
The cost to your company of the asset being acquired is the net of VAT figure.
The date from which to account for the purchase is the date of physical transfer and bringing into use. You depreciate from that date.
That is all.