An extraordinary repair is not considered to be normal preventive maintenance, which is only intended to make machinery attain its originally intended life span. Instead, an extraordinary repair is targeted at those parts of a machine that will wear out by the expected asset retirement date, so that the machine can continue to function for a prolonged period. Examples of extraordinary repairs are a new roof for a building, a new engine for a truck, and repaving a parking lot. Say the line of boats originally had five years remaining on their useful life.

Ordinary repairs are simply recorded as expenses in the current period, leaving the book value of the asset unchanged. Installing a new engine in a truck would be an extraordinary repair, while getting an oil change would be an ordinary repair. Fixed assets are then consolidated and presented in the long-term asset section on a company’s balance sheet. Recording extraordinary repairs in this manner also increases the periodic depreciation expense recorded over the revised remaining life of the asset. If the amount spent on an extraordinary repair is immaterial, it is more efficient from an accounting perspective to charge the cost to expense as incurred, rather than adjusting the fixed asset records.

However, if the amount spent on an extraordinary repair is immaterial, it is more efficient from an accounting perspective to charge the cost to expense as incurred, rather than adjusting the fixed asset records. Similarly, if a machine’s expected life is only prolonged by a few months, it is more efficient to charge the repair cost to expenses. According to generally agreed accounting principles extraordinary repairs are generally capitalized if the useful life is increased by more than a year. Extraordinary repairs are capitalized, which means the repair cost increases the book value of the fixed asset that was repaired, increasing depreciation expenses over the revised remaining life of the asset.

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If an improvement increases the useful life of the asset (fancy weather-resistant shingles on a roof, for example), you should decrease the accumulated depreciation account to record the value of the extraordinary repair expenditures. Extraordinary repairs are capitalized, which means the repair cost increases the book value of the fixed asset that was improved as a result of the repair. The extraordinary repair cost may be added to the original fixed asset or extraordinary repairs accounting it could be identified as a separate fixed asset item directly underneath the original, in order to keep clean accounting records.

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This may be set in contrast to ordinary repairs, which are considered to be normal and preventive maintenance. These expenditures are expensed in the current period by debiting repairs and maintenance (i.e., the expense account) or a similar account. Subsequent expenditures made on property, plant, and equipment may be in the form of either capital expenditures or revenue expenditures. Another way to look at this is to think of ordinary repairs versus major or extraordinary ones. In the case of plant and equipment, revenue expenditures usually are called repairs and maintenance.

1. Extraordinary repairs are capitalized, which means the repair cost increases the book value of the fixed asset that was repaired, increasing depreciation expenses over the revised remaining life of the asset.
2. Ordinary repairs are simply recorded as expenses in the current period, leaving the book value of the asset unchanged.
3. Capital Expenditures (additions, betterment, extraordinary repairs) are debited to it’s corresponding asset account.
4. Installing a new engine in a truck would be an extraordinary repair, while getting an oil change would be an ordinary repair.
5. As a result of this transaction, ABC’s accountants will debit (increase) their fixed asset account and credit accounts payable (AP) by $400,000.

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All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. According to this article, it is to trace and record the cost of an asset in relationship to its useful life. However, the distinction is important because it affects how income in current and future periods is viewed. Ask a question about your financial situation providing as much detail as possible.

The cost of extraordinary repairs should be included in the cost of the fixed asset that was repaired, and depreciated over the revised remaining life of the asset. If the remaining life of the underlying asset is relatively short, then the depreciation period for the extraordinary repairs may only cover a few months, or perhaps a couple of years. In terms of plant and equipment, capital expenditures made after the purchase of an asset are considered additions, betterments, or extraordinary repairs. Capital Expenditures (additions, betterment, extraordinary repairs) are debited to it’s corresponding asset account. The asset’s book value increases by the amount of Capital Expenditure and Depreciation is revised to show the cost recovery. Extraordinary repairs are extensive repairs to machinery, with the intent of prolonging the life of the machinery.

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They should be expensed when they are incurred, and then charged to a maintenance allowance account. As revenue expenditures, they should be expensed in the period where the repair occurred, and then they can be deducted come tax time, which makes you and your CPA happy campers come tax time. Extraordinary repairs, in the field of accounting, are extensive repairs made to an asset, such as property or equipment (PP&E), which prolongs its useful life and increases its book value. The asset’s book value increases by the amount of capital expenditure and the subsequent depreciation expense is revised.