Business Procedures Manual

Fiscal Affairs Division

7.2 Account Number Reference For Capital Assets

(Last Modified on May 4, 2017)

Capital asset transactions, which are housed in the Asset Management module, effect two accounting ledgers: the Capital Ledger and the Actuals Ledger. When capital assets are acquired, they are added to the Asset Management module and accounting entries are created which update the respective accounting/ reporting ledgers. The discussion in this section will center on how capital asset transactions affect the Capital Ledger and the Actuals Ledger.

When a capital asset is acquired/purchased, a debit is made in the Capitals Ledger to an account ranging from 161XXX to 1682XX. The credit offset is normally to an expense offset account, liability account or gift of asset account depending on how the asset was obtained. If a current flow of operating resources were associated with the acquisition, the Actuals ledger would also be affected by the asset transaction.

Example: A building, with a 15-year asset life, was purchased with cash for $ 150,000. For example purposes only, there will be no residual value assigned to this asset. After 14 years, the building is sold for $ 15,000.

Journal Entries for these transactions would be as follows:

Actuals Ledger (Purchase of Building from current operating funds)

860100 Building and Building Improvements-Expense150,000 
Cash 150,000

Capital Ledger (Recording Capital Asset and Depreciation Expense)

162000 Building and Building Improvements-Asset150,000 
860100 Building and Building Improvements-Expense 150,000
890100 Depreciation Expense (Yearly amount)10,000 
162900 Accumulated Depreciation-Buildings 10,000

Actuals Ledger (Sale of Building)

493310 Salvage Sales Capital Assets 15,000

Capital Ledger (Retirement of Asset)

162900 Accumulated Depreciation-Buildings (10,000 X 14)140,000 
493300 Realized Gain/Loss-Retirement of Capital Asset (non-cash)10,000 
162000 Building and Building Improvements-Asset150,000

Notes related to asset transactions of this nature:

1)  The 860100 expense accounts offset between the ledgers and the overall net entry is an increase to capital assets and a decrease to cash.

2)  When the asset is sold, the net gain is effectively $ 5,000 across all ledgers, which is the salvage sales of $ 15,000 less loss on retirement of $ 10,000.

3)  If this Building had been an ongoing construction project (eg. MRR campus managed project) instead of an outright purchase, the construction payments to the contractor and the architect fees would likely have been recorded in the Actuals Ledger in the 75XXXX series of accounts. In the Capitals Ledger, the asset would be recorded in the 169000-Construction Work In Progress account and the offsetting credit would have been in 860100 Building and Building Improvements. In instances like this, reconciliations must be maintained to show how the 75XXXX accounts in the Actuals Ledger offset the 860100 in the Capitals Ledger. Actual depreciation charges would not start until the construction is completed and the asset is placed in service and transferred to a depreciable capital asset account.

For specific examples of capital lease transaction accounting, see section 7.11.2.

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