Investment in fixed assets - accounting account

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Anastasia Osipova

Updated: February 3, 2021

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• Long-term investments in accounting
• Regulations on accounting for long-term investments
• Accounting for long-term investments: postings
• Typical wiring
• Organization and procedure for accounting for long-term investments

Long-term investments are the company's costs for the creation and acquisition of non-current durable assets that are not intended for sale. As sources of their financing, the enterprise’s own funds (net profit, amortization of intangible assets) and attracted funds (bank loans, borrowed funds from other organizations, targeted financing from the state budget, etc.) can be used.

In accounting, financial investments are considered as an independent object along with fixed assets and intangible assets. This approach is associated with the concept of separating costs between the company’s current activities and investments. The main purpose of accounting is to fully reflect information about long-term investments. If we consider the accounting of financial investments briefly, we can say that this is an influx of new capital in the reporting year.

Basic terms, types of investment funds

So, investment funds include institutions that engage in collective investments, managing the savings of individuals and legal entities, investing them in the purchase of securities. This activity is carried out by a professional stock market participant who, thanks to his knowledge and experience, is able to minimize investment risks.

There are several types of investment funds. First of all, these are mutual investment funds (UIFs), whose activities are based on joint investment.

They also include: the Russian investment fund, which acts on behalf of the state; mutual funds, which is a form of mutual investment; hedge funds - which are not available to everyone, there are no regulatory restrictions on them and they are managed by professional investment managers; There are also checking investment funds and exchange traded funds.

It is worth considering in more detail a mutual investment fund (UIF), which in order to carry out its activities (trust management of fund property) is not required to form a legal entity, while it is formed from the funds of shareholders-investors. Trust management is carried out by a special management company.

Structure

Own funds - profit and deductions for depreciation of objects.

Raised funds - borrowed funds (budgetary and extra-budgetary), bank loans, investments of business partners (both Russian and foreign).

Another important parameter is the structure of investment activity. IOCs include:

Accounting for types of financial assets. Type of economic activity. Taking into account funding sources. And also taking into account economic activity.

If we consider the percentage distribution of PF, statistical data on average from 2000 to 2021 fluctuates around the given figures:

• In housing – about 13% on average.
• In buildings and various structures with the exception of residential – 42%.
• In cars, vehicles, instruments and other equipment, about 37%.
• Intellectual property objects - 3.5%.
• Other types – 6%.

If we take into account this expression in rubles, then statistics provide the following parameters for 2021:

• The amount contributed to housing was RUB 2,321.9 billion.
• In non-residential structures and buildings - 7542.8 billion rubles.
• In machinery, equipment, instruments and various types of equipment - 6283.4 billion rubles.
• Investments in intellectual property objects amounted to 558.5 billion rubles.
• To other funds – RUB 1,075.4 billion.

The most successful, from the point of view of investing financial resources, are:

• Mining - there has been an increase since 2009 from 13.2% to 19.4%.
• Sufficient amounts are also invested in manufacturing industries, fluctuating around 14.5%.
• Agriculture shows lower figures – about 3.5%.
• Construction also has lows of around 0.7%.

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According to sources, the indicators are as follows:

• About 45% is invested from own funds. Moreover, about 20% comes from profit, 20% from depreciation and the remaining 5% from reserves.
• Of those attracted, 55% are spent. Of this amount, budget funds make up about 20%. Bank loans 9%. Bonded non-financial amounts are about 10%. Shares - 0.3% Funds - 0.5% and other about 9%. And borrowed funds from other organizations are about 6%.

From a property perspective, the amounts are distributed in percentage terms as follows:

• Russian ownership 85%. Of this, state property accounts for about 13%. Municipal – about 2%. Private – 61%. Mixed Russian without foreign participation about 7%.
• Foreign reaches just over 6%.
• And joint Russian and foreign more than 8%.

Features of accounting for initial placement and redemption of shares

Let's look at the features of accounting for primary placement transactions in the table:

Features of investing in fixed capital

Each business entity involved in the production sector is interested in attracting counterparties who provide additional investments in the fixed assets. One of the tasks of the administrative level is to constantly monitor opportunities for obtaining additional assets. Below we propose to consider the features of investment activity.

Sources of deposits

Investments in fixed assets are one of the methods of improving the financial condition of a company through additional sources of financing. Such sources can be divided into two separate groups. Internal sources are more accessible assets. A distinctive feature of such sources is the ability to determine the volume of revenue not only for the current date, but also in the medium term. One of the main sources of internal financing is commercial profit. Most large companies invest the proceeds into the further development of the company. In addition, the funds received can be set aside for a “rainy day” in order to compensate for the risks of unprofitable projects.

Another internal source of financing is depreciation charges. This term refers to the funds accumulated by the company for the repair of equipment and its operation. All technical products tend to fail. That is why depreciation costs are included in the book value of an asset. This source of deposits is used for timely modernization of production. A distinctive feature of internal sources of funds is the ability to use them at your own discretion. However, quite often, manufacturing companies have to attract third-party assets to their capital.

The second category of funding sources includes external contributions. As a rule, such sources have a large volume. This may be money from domestic and foreign sponsors, or funds borrowed from financial institutions. This category also includes securities issued by the company, as well as subsidies from the regional or federal budget

The funds raised must be used very carefully. Violation of debt repayment deadlines or lack of money to repay financial obligations can result in lengthy legal proceedings and subsequent bankruptcy

What determines the effectiveness of investments?

To assess the effectiveness of investment activities, various economic indicators are used. During such an analysis, not only the amount of income received is taken into account, but also other important factors. Among such indicators it is necessary to highlight:

1. Predicted and maximum payback period for investments.
2. The volume of net profit at various stages of development of the company.
3. Compliance of profit level with profitability norms.
4. Level of profitability of investment activities.

Such activities are carried out in several steps. The first step is to evaluate all available sources of financing. After this, plans are drawn up to make a profit at a specific stage of the company’s development. When conducting such an analysis, such macroeconomic indicators as the inflation rate, refinancing rate and the number of unemployed in the country are taken into account. The above activities make it possible to identify the risks associated with a specific area of ​​investment activity. These criteria allow us to evaluate the results of the company’s economic activities.

The result of investments in fixed capital is the construction of new facilities, repair and modernization of equipment, purchase of transport, equipment and necessary tools, purchase of real estate

Features of accounting for costs incurred by mutual investment funds"

The procedure for accounting for costs is given below:

If actual expenses for cost items exceed the amount of contributions to the reserve, then the difference in this excess will be reflected in the costs of the management company.

Accounting for long-term investments: postings

Investments (financial investments) at the time of acquisition are valued at the purchase price, taking into account the costs associated with paying for brokerage, banking, consulting and other services. Their accounting is kept on synthetic account 58 “Financial investments”:

• by debit – receipt;
• for the loan - disposal.

To maintain analytical accounting, sub-accounts are opened:

• “Units and shares” – 58-1;
• “Debt securities” – 58-2;
• “Loans provided” – 58-3;
• “Deposits under a simple partnership agreement” – 58-4.

Income and expenses that arise upon disposal of financial investments are reflected in account 91 “Other income and expenses.”

Typical wiring

Features of accounting for costs incurred by the management company

Cost accounting is reflected in the following entries:

Accounting for capital investments: purchasing OS

Business transactions that characterize this option for investing in fixed assets are reflected on almost the same principle as in the case of registration of transactions involving the services of contractors during the construction of fixed assets. That is, provided:

• reflecting expenses for the purchase of fixed assets in the debit of account 08 and the credit of account 60;
• when accounting for VAT on the debit of account 19.01.

In addition, if additional spare parts and tools are supplied to fixed assets, their cost can be reflected in the debit of account 10.05. If necessary, other subaccounts of account 10 can be used. For example, subaccount 10.03, if gasoline is supplied along with the fixed asset represented by a car. Or - subaccount 10.09, if the main asset, for example represented by a tractor, is also supplied with agricultural implements (mowers, winnowers).

Fixed assets are accepted for operation at the generated initial cost, and the corresponding business transaction is reflected by posting Dt 01 KT 08. After this, the enterprise accounts for the fixed asset accepted on the balance sheet according to the standards established by the above federal regulations.

You can learn more about the features of accounting using postings to account 08 in the article “08 accounting account (nuances)” .

Some regulatory legal acts (LLA) regulating the activities of investment funds

It is recommended to study the following documents:

Accounting for investments in fixed assets: is it account 08 or 01?

It is important for an enterprise to correctly account for financial investments in fixed capital. Investment accounting is regulated by the Order of the Ministry of Finance on the chart of accounts No. 94n dated October 31, 2000, according to which all such receipts are accumulated in the debit of account 08, used to record the amount of investments as an accounting object

For example, the receipt of borrowed funds from a bank aimed at a specific investment injection is recorded using the following transactions:

• L/t 51 K/t 66 or 67
• D/t 08 K/t 51

On loan account 08 reflect expenses incurred from various sources - own, credit or budget funds. Costs for reconstruction and modernization, as well as for the acquisition of operating systems, are also generated here. In order to control the movement of funds in the account, several sub-accounts are opened (by objects or areas of investment).

The fact of acquiring fixed assets or selling funds for the construction of an object upon its completion is recorded in accounting by posting D/t 01 K/t 08, i.e. the investment object ceases to be an investment, but is included in the company’s PF and becomes an object of accounting in account 01. Information on the movement of funds on accounts 08 and 01 is reflected in the annual financial statements

Criteria for recognition of fixed assets

The conditions under which an asset is accepted for accounting as part of fixed assets are established by paragraph 4 of PBU 6/01 “Accounting for fixed assets”. First of all, the object must be intended for use in the production of products, when performing work or providing services, for the management needs of the organization, or to be provided by the organization for a fee for temporary possession and use or for temporary use. In addition, the organization does not envisage the subsequent resale of this object.

But let’s assume that the company acquired an agricultural land plot and does not plan to resell it. But I haven’t decided yet how to use it. It is possible that in the future it will be used for its intended purpose - for the production of agricultural products. Perhaps the company will change the purpose of the land plot in order to carry out industrial construction on it. As a result, there are no grounds to recognize the site as the main asset.

Note that fixed assets also include objects intended for rent.

What is needed to attract investment?

No one will engage in charity and invest in activities without benefit. For this reason, a special investment agreement is drawn up, which specifies the object, the obligations of both parties, their responsibilities and deadlines. On its basis, the investor receives the right to his share of the profit.

In such a partnership, the risk exists only for the investor, because he cannot be completely sure of the profitability of the business activity. Moreover, if the company does not receive income, it will not have to pay anything to the investor.

Investors will also not make deposits without special reasons. To raise funds, you need to draw up a competent business plan. It must reflect and justify the profitability of investments. It is necessary to first consider the conditions under which the company will agree to invest. In addition, it is worth considering the details present in this process. Otherwise, the entrepreneur may find himself in an uncertain situation.

Investments in fixed assets are easy to attract, and this is a beneficial interaction for both parties to the transaction. For this reason, it is also easy to find an investor for a truly profitable business.

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Investment property “according to the Federal Accounting Standards”

According to IAS 40 (clause 5), “investment property is property (land, or a building (or part of a building), or both) held (by the owner or the lessee under a finance lease) for the purpose of receiving rental payments , or for the purpose of benefiting from an increase in value, or both, but not for:

• use in the production or supply of goods or services or for administrative purposes; or
• sales in the ordinary course of business.”

In the conditions of application of the Federal Accounting Standards, this definition must be adjusted. The fact is that according to Russian rules, real estate intended for receiving rental payments is classified as fixed assets. Therefore, only objects held for the purpose of benefiting from an increase in value can be classified as investment real estate.

Examples of investment property (clause 8 of IAS 40) that an accountant applying FAS can take into account:

• land held for the benefit of long-term appreciation rather than for sale in the short term in the ordinary course of business;
• land held for a future use that is not currently determined. Unless an entity has determined that it will use the land as owner-occupied real estate or for sale in the short term in the ordinary course of business, the land is considered to be held to benefit from appreciation;
• property being built or developed for future use as investment property.

Thus, IAS 40 contains a comprehensive answer to the question about asset classification posed at the beginning of the article.