Borrowing costs encompass all expenses related to borrowing funds, particularly interest costs. For specific assets like manufacturing plants or large-scale construction projects that take substantial time to complete, these costs are often capitalized. Proper capitalization requires that the asset is likely to bring future benefits, and the borrowing costs can be reliably measured.
When purchasing an asset on an instalment basis, accurate accounting is essential to track both the asset and the associated liabilities. This guide provides a comprehensive look at how to properly record the transaction, manage monthly payments, and account for depreciation over time. Learn the step-by-step process of maintaining clear financial records, ensuring compliance, and gaining valuable insights into your company’s assets and liabilities.