What are the Extraordinary Repairs? – Definition, Understanding, Qualifications, and More

Extraordinary Repairs Definition

The extraordinary repairs in the field of accounting are extensive repairs made to the asset.

And such as property and equipment PP&E, Which prolongs its useful life and increases its book value.

It’s set in contrast to ordinary repairs, which are consider to be regular and preventives maintenance.

And standard repairs are expenses immediately rather than existence capitalized.

How Understanding the Extraordinary Repairs?

  • The extraordinary repairs are capitalized, which means the repair cost increases the book value of the fixed asset that improved due to the repair.
  • And the extraordinary repair cost added to the original fixed asset and can be identified. As the separate frozen asset item directly underneath the original, to keep clean accounting records.
  • And fixed assets are then consolidate and present in the long-term asset section on the company’s balance sheet.
  • Also, recording it in this manner increases the periodic depreciation expense recorded over the asset’s revised remaining life. And the depreciation expense flows through to the company’s income statement.

Also Read: What is the Considered the Good Price-To-Book Ratio? – Definition, Basics

What are the Qualifications of Extraordinary Repairs?

  • Firstly, if the amount spent on the extraordinary repair is immaterial, it’s extra efficient from the accounting perspective to charge.
  • Secondly, and the cost to expense as incurred, rather than adjusting the book value of the fixed asset.
  • Lastly, similar, if the machine’s expect life is only prolong by the few months, its extra prudent to expense the repair cost.

Additional Information:

What are the Extraordinary Repairs vs. Ordinary Repairs?

  • The accounting treatment of extraordinary and ordinary repairs is different. Standard repairs are records as expenses in the current accounting period.
  • And leaving the book value of the related fixed asset unchanged. Expenses are costs record on the company’s income statement in the period in which charge incurred.

Also Read: What is the Time Management, and Why its Important? – Definition, 3 Strategies in the Workplace

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