Account 03 in accounting: profitable investments in material assets

Account 03 - what is it for?

Account 03 is called “Profitable investments in material assets.”
On it, accountants keep records of inflows and outflows of such assets. An important condition is the material form. Intangible assets cannot be taken into account in account 03. Do not confuse count 03 with count 01. They are similar, but are intended for different purposes. Account 01 records fixed assets that the company purchased to use for the production of goods, performance of work, provision of services or management of these processes. An additional purpose for the purchase may be rental or leasing.

On account 03, you can only take into account those objects on which the business will earn money by renting or leasing to other companies. If the object is used in the production process, it is sent to account 01. The accountant, together with management, decides on which account to record the fixed asset.

Example . A large supplier of medical equipment, MedSi LLC, purchased a building in the city center and medical equipment for a dental office. He will rent out his property to a group of dentists for a monthly fee, and they will work in his building and on his equipment. Such an investment by MedSi LLC will be reflected in account 03.

Table of main accounting entries for account 03

Purchase and leasing of vehicles

For example, on behalf of a motor transport company, a leasing company purchased 5 buses. There is a consignment note from JSC Avtotekhnika No. 8 dated 04/17/2014. in the amount of RUB 9,500,000, incl. VAT RUB 1,449,152.54 A purchase and sale agreement was concluded between the leasing company and Avtotekhnika JSC.

Subsequently, a vehicle leasing agreement was concluded between the leasing company and the motor transport enterprise for 4 years with the right to purchase.

The vehicles were transferred to the lessee in accordance with the transfer acceptance certificate.

Leasing company on the general taxation system.

According to the accounting policy, for accounting purposes, the amount of depreciation charges for property that is the object of leasing with the right to purchase is determined by the linear method based on the useful life corresponding to the term of the leasing agreement.

The duration of the leasing agreement is 48 months. Consequently, the period during which the use of leased property brings economic benefits is also 48 months.

In the accounting records of the leasing company, entries have been created where:

• Account 03.1 - property of the leasing company;
• Account 03.2 - property transferred to the lessee:

Return of leased equipment by the lessee and its further sale by the leasing company

For example, after two years of operation of vehicles, in April 2016, the lessee terminated the leasing agreement for 5 buses. The leasing company sold the returned property.

Let's use the indicators from the previous example and present them in the form of a table:

Organization at OSN. In the accounting records of the organization, transactions should be reflected in account 03, where:

• Account 03.1 - property from the leasing company;
• Account 03.2 - property transferred to the lessee;
• Account 03.3 - disposal of property:

Characteristics of account 03

03 account is active. The debit reflects the increase in the value of the asset, and the credit reflects the decrease. The balance (balance) of account 03 can only be debit, since credit would mean a negative value of the asset, which is impossible.

To calculate the balance at the end of the period, you need to add the debit balance to the beginning balance and subtract the credit balance. To simplify, we calculate using the formula:

Balance = how much was + how much came - how much went out.

How the value of profitable investments in material assets is formed

Fixed assets are accepted into account 03 at their original cost. It is formed from the following expenses:

• costs of purchasing the asset (excluding VAT and other refundable taxes);
• consultants and intermediaries;
• delivery;
• installation and installation;
• payments at customs.

Let us remind you that before transferring to account 03, the fixed asset will always go to account 08 “Investments in non-current assets”. This simplifies the calculation of the initial cost, since it is formed over time.

Example . An individual entrepreneur bought an office space with rough finishing for rent. First, you need to make repairs, arrange sockets, hang a lamp, buy furniture - all these expenses are sent to account 08 and remain there until the office is completely ready for rent. After this, the entire initial cost is transferred to the debit of account 03.

Depreciation of income investments in MC is similar to depreciation of fixed assets and is reflected in account 02. It makes sense to open a sub-account for the depreciation account, since the parties to the leasing agreement can apply accelerated depreciation.

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Instruction 03 account

According to the instructions for using the chart of accounts for accounting the financial and economic activities of organizations in accordance with Order No. 94n dated October 31, 2000:

Account 03 “Profitable investments in tangible assets” is intended to summarize information on the availability and movement of the organization’s investments in part of the property, buildings, premises, equipment and other assets that have a material form (hereinafter referred to as tangible assets), provided by the organization for a fee for a temporary use (temporary possession and use) for the purpose of generating income.

Material assets acquired (received) by an organization for provision for a fee for temporary use (temporary possession and use) are accepted for accounting in account 03 “Profitable investments in material assets” at their original cost based on the actual costs incurred for their acquisition, including expenses for delivery, assembly and installation.

Material assets acquired (received) by an organization for provision for a fee for temporary use (temporary possession and use) for the purpose of generating income are accepted for accounting as the debit of account 03 “Income-generating investments in material assets” in correspondence with account 08 “Investments in non-current assets".

Depreciation of material assets provided for temporary use (temporary possession and use) for the purpose of generating income is accounted for in account 02 “Depreciation of fixed assets” separately.

To account for the disposal (sale, write-off, partial liquidation, transfer free of charge, etc.) of material assets recorded in account 03 “Income-generating investments in material assets,” a subaccount “Retirement of Material Assets” can be opened for it. The cost of the disposed object is transferred to the debit of this subaccount, and the amount of accumulated depreciation is transferred to the credit. Upon completion of the disposal procedure, the residual value of the object is written off from account 03 “Income-generating investments in tangible assets” to account 91 “Other income and expenses.”

Analytical accounting for account 03 “Profitable investments in material assets” is carried out by type of material assets, tenants and individual objects of material assets.

By debit of the account

By account credit

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Analytical accounting and subaccounts

You can consider analytics for account 03 by type of material assets, by their individual objects, or by tenants/lessees. The following subaccounts can be distinguished:

• MC for rent/leasing;
• MCs rented out/leasing;
• disposal of MC facilities.

If there are subaccounts, the initial cost of the fixed asset will be transferred from Kt 08 to Dt 03 “MC for renting/leasing”. Having transferred the fixed assets for rent, you should transfer it to another subaccount by posting Dt 03 “MC, rented out/leasing” Kt 03 “MC for renting/leasing”.

The disposal of investments is reflected in accounting by the following entries:

• Dt 03 “Disposal of MC” Kt 03 - write-off of the original cost;
• Dt 02 Kt 03 “Disposal of MC” - accumulated depreciation;
• Dt 91 Kt 03 “Disposal of MC” - write-off of residual value.

An example of accounting for investments in material assets and the order of reflection in the balance sheet

Let's look at the situation using an example:

Fantasia LLC (works for OSN, produces food products) bought the building in November 2021 in order to rent it out. The transaction price is 18 million rubles. (including VAT RUB 2,745,762.71). Plus, the company paid the real estate company for assistance in choosing a building and processing documents RUB 131,865.37. (including VAT RUB 20,115.06). In the same month, the company registered ownership of the property and paid a fee of 12,000 rubles. The commissioning of the property was carried out in November 2021. In December of the same year, Fantasia leased the building to IP Skvortsov. In the accounting, the accountant of Fantasia LLC made the following entries:

• Dt 08 Kt 60 in the amount of RUB 15,254,236.29. — the purchase price of the building is reflected minus VAT;
• Dt 19 Kt 60 in the amount of RUB 2,745,763.71. — VAT on the building is reflected;
• Dt 08 Kt 60 in the amount of RUB 111,750.31. — expenses for realtor services are reflected;
• Dt 19 Kt 60 in the amount of 20,115.06 rubles. — VAT on realtor services is reflected;
• Dt 08 Kt 68 in the amount of 12,000 rubles. — state duty for registering the building has been charged;
• Dt 03 accounts - Profitable investments in material assets for rent - Kt 08 in the amount of 15,377,986.60 rubles. — reflects the initial cost of the building.
• Dt 03 accounts - Income-earning investments in material assets leased out, analytics of IP Skvortsov Kt 03 accounts - Income-earning investments in material assets for rent - 15,377,986.60 rubles. — the building was leased to IP Skvortsov.

To calculate depreciation for the building, the accountant of Fantasia LLC determined the useful life of the property in accordance with the “Classification of fixed assets included in depreciation groups” (Resolution of the Government of the Russian Federation dated January 1, 2002 No. 1). This kind of real estate belongs to the 9th group, the useful life is 30 years. The depreciation method is linear. Then the amount of monthly depreciation for the building will be 15,377,986.60 rubles. / 360 months = 42,716.63 rub. In accounting, the accountant will reflect depreciation for December 2021 as follows:

• Dt 91.2 Kt 02 “Depreciation of profitable investments in material assets” in the amount of 42,716.63 rubles. — depreciation is taken into account as part of the company’s expenses.

Income-generating investments in tangible assets are displayed in the balance sheet at their residual value on line 1160. The residual value is determined by reducing the initial value of the asset (debit balance of account 03 - Income-earning investments in tangible assets) by the amount of depreciation taken into account in expenses (credit balance of account 02 for these assets) . In the example conditions, the value of the building's valuation, which should be displayed in Form 1 as of December 31, 2016, will be RUB 15,335,269.37. (15,337,986 – 42,716.63 rubles).

Correspondence of account 03 with other accounting accounts

We have already found out that account 03 corresponds with accounts 02, 08 and 91. But these are not all possible combinations. Let's consider all the options:

Account 03 in accounting

Account 03 is included in accounting. accounting for non-current assets. Therefore, the account is active.

The debit of account 03 reflects the receipt of investments that should generate income for the organization by providing it for temporary use with subsequent redemption or without redemption.

The credit of account 03 reflects disposals: write-off, sale, shortage, damage, gratuitous transfer, liquidation.

It is important to note : for organizations whose main activity is not leasing property on an ongoing basis, records of leased property are kept in account 01 “Fixed Assets”.

The organization of analytical accounting on account 03 is shown in the diagram: