How to show asset in the books??

[Guest]

Dear Sir,

One of the vendor of my companies has offered us to give a machine (FA) to use till we purchase the material from them.

When we will stop purchasing the material from them then they will take back the machine. So, my query is whether we have to show the Asset in the books..?? If yes, then how.??

Awaiting for your precious comments

[CAGOPALJI AGRAWAL]

We have to look up the detailed terms and conditions of the contract. Proma-facie, it meets out the definition of the asset but you have to ascertain the value against the same to account for the same.

AI Summary

Asset recognition: examine contract terms to determine recognition and valuation for accounting when supplier provides a machine for conditional use. A supplier provided a machine for use while purchases continue, to be taken back if purchases stop; contract terms must be examined to determine if the arrangement meets asset recognition and, if so, an appropriate value must be ascertained and the machine accounted for consistent with applicable accounting principles.