Journal Entry for Repair of Vehicle

Journal Entry for Repair of Vehicle

In this article we would discuss the repair of the vehicles. Repair expense may be classified into revenue expenditure and Capital expenditure. Revenue expenditure is charged to profit & loss account, while capital expenditure is added to the cost of asset.

Journal Entry for Repair of Vehicle as Revenue Expense

Small expense is usually of revenue nature and is debited in the books of account. The two important conditions for recognizing the repair as revenue expenditure are listed below

·         Involves small amount.

·         Provides short term benefit.

For example changing of a nut costing 10 is a normal repair and shall be debited in the books of account.

Date	Particular	Ledger Folio	Dr.	Cr.
	Repair of Vehicle		10
	Cash			10

Journal Entry for Repair of Vehicle as Capital Expenditure

Capital expenditure is expected to provide the long term benefit like improvement of efficiency etc. These expenses shall be added to cost of asset. The two important conditions for capital expenditure are

·         Involves big amount.

·         Provides long term benefit.

For example an engine overhaul expenditure of PKR 20,000 would reduce the fuel consumption would be treated as capital expenditure. The expenditure shall be added to cost of asset by debiting the asset and crediting the cash (assuming cash expenditure).

Date	Particular	Ledger Folio	Dr.	Cr.
	Vehicle		20,000
	Cash			20,000