Home > Accounting Entries > Assets > Property, Plant and Equipment > Office Building
Definition:
Office Building is a long term capital asset which can be used by the business for office purpose, as an administrative location or as a manufacturing location. These places can be owned or leasehold. In case owned, it can be a substantial part of the assets on the financial statements. Leasehold buildings are accounted as a component under Right-To-Use.
Office Buildings can take a lot of time to be constructed and are subjected too depreciation. During the period of construction or development, costs incurred is to be accounted as Capital Work-In-Progress and once the project is completed, the same needs to be capitalised in the financial statements. Depreciation can be applied based on various methods which can be straight line, reducing balance, based on usage, shift based, etc.
Accounting Entries:
Initial cost for purchase/construction:
Office Building A/c DR
Cash/Bank A/c CR
Amount: Purchase price of the office building.
Capitalsation of Office Building expenditure till date:
Office Building A/c DR
Capital Work-In-Progress A/c CR
Amount: Costs incurred and parked in Capital WIP A/c.
Subsequent expenditure resulting in increase in efficiency:
Office Building A/c DR
Cash/Bank A/c CR
Amount: Costs incurred on subsequent expenditure.
Subsequent expenditure not resulting in increase in efficiency:
Repairs and Maintainence A/c DR
Cash/Bank A/c CR
Amount: Costs incurred on subsequent expenditure.
Depreciation expense (periodic basis):
Depreciation Expense A/c DR
Accumulated Depreciation A/c CR
Amount: Depreciation expense to be calculated according to the accounting policy followed by business.
Sale/Disposal of Office Building:
Cash/Bank A/c DR
Loss on Sale A/c DR
Accumulated Depreciation A/c DR
Office Building A/c CR
Gain on Sale A/c CR
Amount: If the sale price > net book value of office building, then gain. If the sale price < net book value of office building, then loss.
Net book value = Original value of office building (-) Accumulated depreciation as at sale date.