Accounts entry

Capitalization (Asset)  Dr

  To  Inventory a/c

Thank u sir. You mean to say I have to create a new ledger "Capitalisation" under assets and make it debited. Right sir?

Dear,

Just explain to me  one point... Where the flooring material has been used ? That become your fixed asset... The word capitalize means  you should debit the value to that asset head.

The material was used to make the floor of our factory and the work is done. The basic confusion is whether the debit side would be an "expense head" or "asset head" and what the exact debit-ledger is. The total value is nearly 1,00,000/-.

The debit side will be Asset head  since value of Factory is on Assets side

And in which name should I create the ledger?

You must have already opened the ledge account for your factory cost... Is  it not... The flooring cost will go into that... For furrther doubts send me Personal Message instaed of this Forum..

I have PMed you, kindly get it sir.

Please follow journal entry. Debit   Factory building a/c and credit inventory a/c. Read accounts rules are to be follows. The rules are debit what comes in. and credit what goes out. Here the inventory coming into  building (asset) a/c. Therefore debit factory building a/c.  You are crediting the inventory a/c. since the material is going out from the inventory stock. It means one asset value is increasing and one asset vale us decreesing. Therefore double entry is over.

Sir

     As answer by Shri Rama Chary Sir u have to take Entry in your Book of A/c

I total Agree with sir Answer & it is Corret Entry For your Company A/c

The main question arises here that for what purpose the floring is used. For flooring- O. K. Now has it been used to repair the old floor, or a new bulding or a new portion of the building is coming up.? whether the earning capacity of the building is increased or the additional accomodation has been added?

If the flooring material is being used only as a part of the repairing process, The cost would be added to profit and Losss A/c treating it as revenue Expences, the entry would be as under.

Building maimtenance A/c/Profit And Loss a/c Dr.

To Inventory A/c                                                                  (A)

The cost would be added to profit and Losss A/c treating it as revenue Expences. The result would be the reduction of Profits and finally reduction in the TAX LIABILITY.

But if it is being used as cost of the new building than the entry shall be as follows:

Building A/c Dr.                                                                 (B)

To Inventory A/c      

The cost would be added to the value/Written down value of the ASSET being FACTORY BULDING thereby increasing the Depriciation which would be debited to P and L A/c. on yearly installment basis to be calculated on the written down value mathod.                                             

According to Our India accounting standards we have to show our all the transaction should be clear

so in this case you have to first create a seprate ledger and transfer the stock to that ledger account then there after

Building Account Dr

Cr (That seprate acc created)