All about the write-off procedure
Reasons, restrictions, sample orders and forms of acts.
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- How to write off fixed assets from the balance sheet
- Features of write-offs in budget structures
- General logic of actions
- Accountant's actions
- Write-off order
- Reasons for write-off
- Act on write-off of fixed assets
- Tables of the write-off act form
- Protocol for write-off of fixed assets
All fixed assets sooner or later become unusable. Machines, equipment, and even the capital buildings themselves are deteriorating and can no longer be used for their intended purpose. Ultimately, the fate of these non-current funds is to be written off the balance sheet. How to do this correctly will be discussed in this article.
Documentation of OS write-off
Every action with the company's property must be documented. We do not have the right to simply throw away or otherwise dispose of an asset that we cannot or do not want to use in our business.
How to write off fixed assets from the balance sheet? Who should initiate this procedure and who will be involved in it? What documents will be required to write off fixed assets?
The procedure for writing off fixed assets includes several stages, at each of which certain documents are drawn up.
Stage 1. Initial information to management
At this stage, the employee tasked with monitoring the safety of a specific asset informs management that the fixed asset has become unusable. At the same time, the reasons for writing off the asset are communicated to management: the asset is morally obsolete, physically worn out, has become unusable due to a breakdown, etc.
The first stage document is a memo.
Stage 2. Organizational
The manager who received the memo cannot, solely on its basis, give the accountant an order to write off the asset from accounting. First, it is necessary to objectively assess the condition of the fixed asset and obtain reasonable conclusions about the impossibility of using it in the company’s activities.
The second stage document is an order to create a commission to write off a fixed asset.
Stage 3. Work of the commission on write-off of fixed assets
At this stage, fixed assets subject to write-off are comprehensively examined by a commission created in the company. She not only studies the asset itself, but also examines the reasons why it became inoperable, identifies the culprits, studies technical documentation, requests economic and financial information about the object, makes the necessary calculations, identifies the operating conditions of the OS and other circumstances that allow justified conclusions about the need to write off the asset from the balance sheet.
Documents of the third stage - defective act, minutes of the commission meeting, conclusion of the commission on write-off (as a separate document or as a section of the protocol, act).
If you do not organize the work of the commission, claims from the tax authorities are possible. When writing off fixed assets with a residual value, the expenses reflected in tax accounting may be considered unjustified.
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Stage 4. Administrative
After the commission’s conclusions reach the head of the company and if he agrees with them (considers the commission’s conclusions to be justified), another order is issued. It describes in detail the subsequent write-off procedure, indicating the responsible executors and the deadlines for fulfilling management’s instructions.
The rules for writing off fixed assets are described in paragraphs. 75–86 Methodological guidelines for accounting of fixed assets (approved by order of the Ministry of Finance dated October 13, 2003 No. 91n). If necessary, these recommendations can be supplemented with other procedures and documents based on the specifics of the enterprise. The amended procedure should be recorded in a local act (for example, in a regulation on the write-off of fixed assets of an enterprise or instructions on the procedure for recording and writing off assets).
The fourth stage document is an order to write off a fixed asset.
Stage 5. Final
To reflect the write-off of a fixed asset in accounting, a special document is required containing all the necessary information about the object being written off, including its natural and cost indicators. It must be signed by the responsible persons and approved by the manager. This document, complete with other papers collected and executed at the previous stages, will serve as the basis for writing off the fixed asset from the balance sheet and recognizing the corresponding amount of expenses in accounting and tax accounting.
The fifth stage document is the act of writing off a fixed asset.
In fact, documenting the write-off may not end there. If the object being written off is subject to disassembly, suitable parts and assemblies must be entered into the warehouse and reflected in accounting. For this, the appropriate documents must also be drawn up. If the object is disposed of by a third-party contractor, a separate document will also be required to justify the costs of disposal - an acceptance certificate for the work performed.
Let us dwell in more detail on the preparation of individual documents for the write-off of fixed assets, as well as the nuances of the write-off procedure and the features of their reflection in accounting.
How to write off fixed assets from the balance sheet
Fixed assets include expensive means of production that last more than a year. They are written off from the balance sheet of the enterprise for the following possible reasons:
- The funds are outdated (physically or morally), that is, they have served their service life;
- They were sold to a third party;
- They were exchanged for something useful, for which a barter agreement was concluded;
- Given as a gift to a legal entity or individual;
- Equipment or other property is hopelessly damaged as a result of an accident;
- It wore out prematurely;
- It was stolen (more often accountants and lawyers use the word “stolen”, however, this does not change the essence).
In each of the listed situations, documentation is required, which includes recording the reasons on paper and reflecting the relevant business transactions in the financial statements.
According to paragraph 28 of the Accounting Rules (PBU 6/01), fixed assets are subject to write-off, the use of which cannot bring financial benefit to the enterprise.
Features of write-offs in budget structures
In budgetary institutions, the procedure for writing off obsolete, destroyed or stolen non-current assets is somewhat different from the norms in force for commercial structures. This is due to the fact that the owner of fixed assets in this case is the state, and therefore in many cases permission from a higher authority is required for the right to dispose of particularly valuable property on the balance sheet (the list of items is given in Law No. 7-FZ, Article 9.2, paragraph 11) . There are objects that the heads of budgetary organizations can write off themselves, if they are not included in the authorized capital of other companies. The general principle of withdrawal from the balance, however, remains the same.
How to write off an operating system from the balance sheet if it is completely depreciated?
Based on the rules of PBU 6/01, fixed assets can be written off from the balance sheet of an enterprise only in the process of disposal (sale, transfer) or complete loss of their ability to generate income.
It is necessary to reflect losses in connection with the write-off of fixed assets that have ceased to be profitable and cannot be restored as part of other expenses for the period to which they relate.
When calculating income tax, you need to take into account expenses for liquidation of fixed assets in non-operating expenses.
Important! depreciation cannot be regarded as a write-off of property. Even if this resource is completely exhausted, the property can be recorded on the balance sheet at zero residual value.
Moreover, if fully depreciated property consists of several components, then partial write-off is possible, since some elements of the fixed asset may be beneficial.
If the fixed assets are fully depreciated, then the company has the right to write it off the balance sheet.
Such a fixed asset has no residual value, so losses from this procedure will only be associated with payment for the process of dismantling, dismantling, and disposal.
In this case, the parts and components of a depreciated fixed asset can be taken into account if they can be used in the future.
General logic of actions
In a situation where the write-off of deteriorated property on the balance sheet becomes an urgent task, the issue of execution is decided by the head of the enterprise, who issues an order to create a liquidation commission.
In turn, the commission, fulfilling this order, draws up an act. There is a story ahead about how these processes should take place, but it should be understood that they are the ones that give the accounting department the basis for making entries. Everything else is a matter of technique.
The chart of accounts has not changed in 2021, and there is reason to assume that it will remain unchanged in the near future. The commission's conclusion consists of stating the actual condition of the property, assessing the feasibility of its further use and the validity of liquidation. In some cases (when it is difficult or impossible to come to some conclusions on your own), outside experts are invited.
Write-off of fixed assets is carried out in accordance with the form established for each specific case, approved by the Ministry of Finance. If you have difficulty filling out the forms, you can use a sample.
Accountant's actions
Depending on the reason why the property needs to be removed from the balance sheet, the correspondent accounts involved in this operation change. The most common types of postings are discussed below.
The property is partially or completely worn out
The simplest case is when an object “died a natural death,” that is, it completely exhausted its service life, and after that it safely failed. In this case, it has no value in monetary terms, since it is completely depreciated. After the act is drawn up and signed by the members of the commission, and then endorsed by the head, the accounting department can deregister the asset without disturbing the balance, making an entry between subaccount 01.1 (at original cost) and 01.2 (the amount of full depreciation).
With premature moral or physical wear and tear, the task becomes more difficult. On the balance sheet asset is the full amount of the initial costs for the acquisition of the object (subaccount 01.1), on the other hand, depreciation is accrued incompletely, that is, an object with a residual value is subject to write-off, which is very simple to determine (you need to subtract the amount of depreciation from the initial cost). The wiring will look like this:
On loan account 01–1, the full value of the liquidated asset is written off to debit 01.2. Then depreciation is written off from the account. 02. Then follows the posting of depreciation amounts (Dt 02 - Kt 01.1). As a result, account 01.2 receives the residual value of the property (the difference between the debit and credit of account 01.2). The “under-depreciated” part is accounted for as expenses and written off on account 91.2 (Dt 91.2 – Kt 01.2). The account is closed.
Asset sold
The basis for write-off are two documents - the act of the liquidation commission and the purchase and sale agreement. The wiring is as follows:
- Dt01 – Kt01.1 – the initial cost of the property is entered;
- Dt02 – Kt01 “Disposal” – for the amount of depreciation;
- Dt91.2 – Kt01 – for the residual value of the object of sale;
- Dt62 – Kt91.1 – revenue (amount of agreement);
- Dt91.2 – Kt68.2 – VAT is charged.
The property was transferred to the authorized capital of another company (share contribution)
Property that is of no value to one owner may be useful to another. If the written-off asset acquires the quality of a share contribution, the accounting department uses account 58. Postings:
- Dt01 – Kt01.1 – at the original cost;
- Dt02 – Kt01 – for accumulated depreciation;
- Dt91.2 – Kt01 – for residual value;
- Dt58 – Kt01 – the amount of contribution to the authorized capital of the enterprise receiving the asset.
VAT is not charged, since the share contribution is not a sale.
The object is transferred free of charge (donated)
Yes, this can happen, but it is important that behind the act of gratuitous assistance there is not a hidden sale (for cash), which is a violation of the law. The write-off procedure is approximately the same as for sale or depreciation (VAT is calculated based on the market price of the asset), with the difference that the posting of Dt99 - Kt91.9 is carried out for the amount of the financial result (actually the sacrificed loss).
Partial liquidation
Most often this situation arises in relation to real estate. Anything else is difficult to write off completely, but some of the buildings, for example, inside a plant, can actually be demolished. At the same time, the main part of the workshops remains and functions, but the total value of assets and the amount of their depreciation charges are reduced. Transactions are reflected in account 91.
Postings in accounting
How to write off a fixed asset in accounting? What accounts are involved in this case? At which stage of the write-off procedure can entries be made?
Accounting entries are always the final (final) actions in the procedure for writing off an object. They are produced only after a complete set of documents has been generated. The act of writing off an object (or group of objects), approved and endorsed by the responsible persons, will be the basis for writing off fixed assets.
Postings for writing off an asset that has become unusable (underdepreciated):
Postings for write-off of fixed assets with zero residual value (fully depreciated):
The following materials will introduce you to a variety of wiring:
- “Postings under the assignment agreement”;
- “Accrued depreciation of fixed assets - posting”;
- “Temporary disability benefits have been accrued - posting.”
Write-off order
The procedure for writing off fixed assets does not provide for an order as such. The management, by issuing such a document, expresses its intention to liquidate any expensive object “hanging” on the balance sheet, and at the same time appoints executors, which probably constitutes the most important part of the text of such an order. The basis for the actions of the accounting department is not an order, but an agreement (if we are talking about exchange, donation, sale or any other method of alienation) or an act on the complete unsuitability of the object for use.
However, many companies have a practice according to which the initiation of write-off is expressed by order. There is no strictly approved form (unlike an act), but an approximate example may look like this:
Sample order
The document briefly justifies the decision to liquidate the named facility, most often due to the economic inexpediency of further operation and (or) repairs, as well as:
- A commission is appointed, which, as a rule, includes one of the managers of the enterprise (deputy director, chief engineer), the head of the department for whose needs the asset was used, a representative of the accounting department (usually the chief accountant), etc.;
- The goal is formulated;
- A commission chairman is appointed who is responsible for its work.
The order is signed by all the persons mentioned in it, for which their surnames with “shelves” are printed at the bottom of the sheet.
Reasons for write-off
The process of writing off fixed assets at any enterprise is inevitable. Not only does equipment naturally age, new types appear, but accidents and natural disasters occur, as a result of which property, movable and immovable, becomes unusable. Numerous examples of funds failing prematurely and unexpectedly could take up more than one page of neat text. There are often cases when cars, which are still completely new, are damaged in an accident to such an extent that there is nothing to repair, and it’s good if people do not suffer. Due to voltage surges or other disturbances in normal operating conditions, electronic and electrical equipment deteriorates. There is also such a thing as obsolescence, which often happens suddenly, when equipment that has not yet been physically worn out turns out to be unnecessary or intended for the production of a product that is no longer in demand.
The most common and expedient reason for writing off fixed assets is the impossibility of their further commercial use, and the costs of restoration are unreasonably high.
In recent years, new terms have emerged to describe previously unaccounted for reasons for early withdrawal of equipment:
Environmental aging. It means non-compliance with new environmental requirements adopted at the legislative level. If, for example, an enterprise's treatment facilities do not meet established standards, they should be replaced and the old ones written off along with dismantling costs;
Social wear and tear. In this case, the reason for write-off may be the adoption of legislative acts that reflect more stringent requirements for industrial relations, and, as a result, fixed assets.
Act on write-off of fixed assets
The requirements for the execution of acts of write-off of fixed assets are strict. In the forms approved by the State Statistics Committee of the Russian Federation (Resolution 7 of January 21, 2003), additions are allowed (if necessary), but any editing is possible with the written permission of the head of the organization and must be justified, but no columns can be excluded.
The OS-4 form of the same type is the most universal and therefore is used more often than others. You can easily download it for free on our website:
OS-4
This form assumes the possibility of recycling suitable parts, mechanisms or assemblies and serves as the basis for their receipt in the warehouse, as well as further useful use for production purposes or sale.
The OS-4 act form is intended for writing off a wide range of assets, but to remove a vehicle from the balance sheet, another is used, OS-4a (or OS-4b for several objects) which is carried out in triplicate (one is intended for deregistering a car from the state registration with the traffic police) .
If property is alienated due to gratuitous transfer to another owner or is sold, then the form of the OS-1 act (acceptance and transfer) should be used.
In any case, the document contains a number of general required items:
- Reasons for liquidation of property;
- Description of the technical condition of the object identified as a result of the inspection carried out by the commission;
- Possibility and feasibility of restoration work;
- The degree of suitability of operable components, parts or parts of an object and their price in monetary terms;
- Reasonable argumentation for writing off the operating system;
- A defect report in the event of failure due to normal operational wear and tear, listing all existing defects.
In case of obsolescence, a defective act is not needed in the OS-4 form, but instead an order from the manager is attached.
Tables of the write-off act form
The main responsibility of the members of the liquidation commission is to fill out three tables contained in the OS forms.
- The first of them is intended for entering information contained in the acceptance certificate, on the basis of which the equipment was used in production during the period preceding the write-off, general information about it (lifetime and accrued depreciation);
- The second table should contain information about the property being written off, the presence of precious metals in its parts and other information from acts OS-1, OS-1a and OS-1b.
- The third part records the costs of disassembling and recycling an object in order to extract useful components, as well as their cost.
With the exception of form OS-4b, all others are made in two copies, one of which is transferred to the accountant and serves as the basis for postings, and the second is given to the employee appointed responsible for the safety of written-off fixed assets, who delivers the recycled products to the warehouse.
