Download the best Free CA FINAL android app for cracking your exam! Download Now

Capital Expenditure in an Educational Institution

Capital Expenditure in an Educational Institution

Fixed Assets in an educational institution primarily consists of:
(a) Land
(b) Buildings/Building Renovations (Classrooms, Hostels, Cafeterias, Labs, Administrative Building,
Staff Quarters, etc.)
(c) Infrastructure (Roads, Parking Lots, Outside Lighting, Sidewalks,etc.)
(d) Plant and Machinery (Office Equipment, ACs, Power backup units, etc.)
(e) Furniture and Fixture
(f) Computers, printers, servers, etc.
(g) Vehicles.

Capital Expenditure in an Educational Institution

Fixed assets may further be grouped into movable and immovable assets. With regard to the movable assets, assets should be capitalised as soon it is installed at the premises. All incidental costs incurred with respect to put the asset ready to use should be capitalised. With regard to the immovable assets, the cost of asset and initial acquisition shall include all expenses related directly to the acquisition or construction. Construction costs include materials, labour, overhead directly related to the construction, interest on loans, building permits, and fees, i.e. attorney and architecture. The amount of borrowing costs eligible for capitalisation should be determined in accordance with Accounting Standard (AS) 16, “Borrowing Costs”. A separate Capital Work in Progress (CWIP) account for each project should be opened to track the cost incurred in a specific project. Further, this account should be segregated to track the cost of assets in the block of assets as specified.

Capital Expenditure in an Educational Institution

For example, construction of a student lab will involve civil and sanitary work, electrical fittings, furniture and fixture, installation of computers, wires and servers, etc. Different ledger accounts should be opened to segregate the costs under a group account Student Lab-CWIP so that it is easy to capitalise the value of total assets on a given date. Accounting Standard (AS) 10, “Accounting for Fixed Assets and Guidance Note on Accounting by Schools” should be referred for accounting and disclosure requirements of the fixed assets. In case any grant is received for the fixed asset acquired, Then Accounting Standard (AS) 12, “Accounting for Government Grants” should be referred. The educational institution is responsible for maintaining appropriate records of control and accountability of its capital assets. All records in regard to additions and deletions of fixed assets should be maintained. Further, the institution must perform a periodic physical verification of fixed assets and reconcile any differences to the fixed asset records. Generally, the storekeeper maintains stock registers of the construction material containing the details of receipts of material and issues of material to construction sites. The item-wise details of materials are recorded in the stock registers.

Capital Expenditure in an Educational Institution

The consumption of materials made by various departments/ construction sites is assessed through these stock registers. Then, the store keeper periodically submits the consumption of materials to the accounts department.

Capital Expenditure in an Educational Institution

cakart

Click here to download FREE CA CS CMA books.

Capital Expenditure in an Educational Institution

Leave a comment

Your email address will not be published. Required fields are marked *