Accounting of Fixed Assets

accounting as it pertains to the quantity, movement, wear, and repair of fixed assets. In the USSR, the most important tasks of this branch of accounting are to document and record the movement of fixed assets, to monitor the upkeep of fixed assets, and to amortize and depreciate the assets in timely fashion, all of which contributes to a more efficient use of these resources.

Fixed assets are recorded on the assets side of the balance sheet at their original cost. A distinction is made between the original, or historical, cost of an asset and the asset’s replacement cost, which takes account of current prices. Replacement costs are obtained from the periodic revaluations of fixed assets carried out for the economy as a whole. The latest revaluation for organizations operating on the basis of khozraschet (profit-and-loss accounting) was made using prices prevailing on Jan. 1, 1972; for organizations financed through budgetary allocations, the latest revaluation was based on prices in effect on Jan. 1, 1973. The results of the revaluations are usually included in the organizations’ charter-fund accounts. The quantity and movement of fixed assets are shown in the fixed-assets account; depreciation is recorded in an account on the liabilities and net-worth side of the balance sheet. The accounting unit is each separate asset. The operation of enterprises and economic organizations is analyzed with the aid of accounting reports on fixed assets; the assets are grouped according to the standard classifications of the Central Statistical Administration of the USSR.

When assets are acquired through deeds of acceptance and transfer (capital investment, free acquisition), the asset is given an inventory number, and a separate inventory card is prepared. The acquisition is recorded as a debit in the fixed-assets account and a credit in the charter-fund account. The reverse procedure is followed when the asset is withdrawn.

Since fixed assets wear out with use, a source of finance—the amortization fund—is established for repair and eventual replacement. The amounts for amortization (figured on a monthly basis) included in unit production costs in accordance with applicable norms are debited to the accounts for production expenses and credited to the amortization fund. In the latter account, there are separate credit entries, one for replacement of assets and one for complete overhaul. As a consequence of these entries, the net book value of the assets declines.

Accumulated depreciation is reflected in the total of the credit entries in the amortization fund for replacement of the asset. This amount in turn is entered as a debit in the charter-fund account and as a credit in the account for depreciation of fixed assets. An amount equal to the credit entries for asset replacement, less the sums devoted to the fund for the development of production, is transferred to Stroibank (with a consequent reduction in the amortization fund); in the transfer, however, an allowance is made for the enterprise’s contributions to the industrial development fund.

The other part of the amortization fund, the credit entries for complete overhaul, is kept by the enterprise (in an account for settlement or special account at Gosbank). Expenditures for complete overhaul performed by outside contractors appear as debits in the complete-overhaul account and as credits in the account for payments to suppliers and contractors. Expenses for complete overhaul performed by the enterprise itself are debited initially to the auxiliary-production account and later to the complete-overhaul account, in which the actual cost of the repair work is shown. This cost is recorded as a deduction from the amortization fund. Expenditures for routine repairs are recorded under production costs, either directly or through earmarked sums under the heading of reserves or anticipated expenditures.

The retirement of fixed assets is recorded and documented in the charter-fund account (with the original value of the asset and the costs of retirement being debited, and accumulated depreciation and the value of remaining materials being credited). Losses from the retirement of fixed assets as a rule figure in the enterprise’s income statement.