PLANT ACCOUNTING RENEWALS AND REPLACEMENTS ACCOUNTING MANUAL P …

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ACCOUNTING PROCEDURES. The American Institute of Certified Public Accountants. (AICPA) Audit Guide prescribes that funds set aside for the …

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PLANT ACCOUNTING: RENEWALS AND REPLACEMENTS
ACCOUNTING MANUAL P-415-66
PLANT ACCOUNTING: RENEWALS AND REPLACEMENTS
Contents
Page
I. Introduction 1
II. Definitions 1
A. Improvements or Betterments 1
B. Repairs 1
C. Renewals and Replacements 1
III. Accounting Procedures 2
A. Setting the Reserves 2
B. Reporting 3
C. Fiscal Closing Entries 3
IV. Responsibilities 4
V. References 4PLANT ACCOUNTING: RENEWALS AND REPLACEMENTS
P-415-66
ACCOUNTING MANUAL Page 1
TL 58 12/1/92
RENEWALS AND REPLACEMENTS
“Spring is a true reconstructionist.”
–Henry Timrod
I. INTRODUCTION
Renewals and Replacements funds, which are reported in the
Plant Funds group, provide the resources for the renewal and
replacement of plant assets as distinguished from additions
and improvements to plant. The purpose of this chapter is
to provide definitions of commonly used terms and to provide
the accounting procedures necessary for recording and
reporting on Renewals and Replacements Reserves funds. This
is one of four major categories in the Plant Funds group of
accounts. The other three categories–Unexpended Plant,
Retirement of Indebtedness, and Investment in Plant–are
covered in separate Accounting Manual chapters.
II. DEFINITIONS
In some instances, there is a fine line of distinction
between a renewal and replacement and an improvement. Some
portion of renewals and replacements may be capitalized as
additions to plant if they are in fact improvements or
betterments. However, replacements of component parts of
buildings or structures which do not significantly lengthen
the life of the entire asset should not be capitalized.
The following definitions will assist in determining what
expenditures…