The key steps in accounting for the purchase and installation of equipment are as follows:
First, when the equipment is purchased and needs to be installed, the accounting entry is:
Debit the "Construction in progress" account to record the initial cost of the equipment. At the same time, if it involves input VAT, debit the "tax payable - payable VAT (input tax)" account. Finally, the "bank deposit" account is credited to reflect the payment.Next, the installation costs paid during the installation process, the accounting entry is adjusted to:
Debit the "construction in progress" account to reflect the increase in installation costs.
Credit "bank deposits" or other related expenses.
When the installation is completed and the equipment is accepted and delivered for use, it is necessary to transfer the "construction in progress" to a fixed asset:
Debit the "Fixed Assets" account to indicate that the equipment has been available for long-term use.
Credit "construction in progress" to indicate that the installation project has been completed.
In the case of outsourced installations, additional accounting operations include settlement with the contractor, as well as the receipt of project materials in the case of self-owned installations. The costs and taxes involved in these operations need to be adjusted accordingly. It is important to pay attention to the carry forward of VAT when carrying out the accounting treatment.
In summary, the accounting entries for the acquisition and installation of equipment involve debits and credits between several accounts, and the key is to record the acquisition cost of the equipment, the installation costs, and the eventual conversion to fixed assets, and to deal with the relevant taxes in the process.