A fixed asset is recorded at cost when purchased, and cash or bank is reduced by the amount paid.

The company bought equipment for 300,000 paid from the bank.

When buying on credit, record the asset at cost and record the liability under Suppliers (or Notes Payable if a note is signed). When paid, close the liability.

The company bought a vehicle for 400,000 from a supplier on credit, then paid two months later from the bank.

Record the asset at cost and record the loan as a liability. Each installment is split into loan principal (reduces the liability) and interest (finance expense).

The company bought a machine for 600,000 fully financed by a bank loan. The monthly installment is 56,000: 50,000 principal and 6,000 interest.

Asset cost = purchase price + all costs necessary to bring the asset to its location and working condition (transport, customs, installation, test runs).

The company imported a machine: invoice price 500,000, customs 40,000, transport 20,000, installation & testing 40,000 — all paid from the bank.

During construction, costs accumulate in Projects Under Construction. When the asset is complete and ready for use, the balance is transferred to Fixed Assets and depreciation begins.

The company is building a warehouse: paid the contractor a first payment of 100,000 then a second of 150,000. The building was completed and handed over.

(Same entry repeats for the second payment of 150,000)

When a partner contributes an asset (property, vehicle, machine) as a capital share, the asset is recorded at its approved fair value against the Share Capital account.

A partner contributed a building with an approved value of 1,000,000 as an in-kind share at incorporation.

When a fixed asset is bought with VAT on the invoice, there are two cases: Case 1 — the VAT is deductible (an asset used in a taxable activity, with a valid electronic tax invoice): record it in the VAT account (input VAT) and keep it out of the asset's cost. Case 2 — the VAT is not deductible: add it to the asset's cost and depreciate it with the asset.

The company bought computers and office equipment for 300,000 + 14% VAT = 42,000; the total of 342,000 was paid from the bank.

The company bought a passenger car for the manager for 400,000 + VAT 56,000 — VAT on passenger cars not used in the licensed activity is not deductible, so it joins the cost.

Depreciation spreads the asset's cost over its useful life. The entry is always the same regardless of the calculation method: DR Depreciation Expense / CR Accumulated Depreciation.

The year's depreciation on equipment is 60,000.

Accumulated depreciation is a contra-asset shown in the balance sheet as a deduction from the asset's cost — the asset account itself is never reduced during its life; it stays at cost with the accumulated depreciation against it.

Annual depreciation = (Cost − Salvage value) ÷ Useful life. An equal charge every year.

A machine costing 500,000, salvage value 50,000, useful life 5 years.

Depreciation is a fixed rate applied to the net book value (not cost), so the charge is high in early years and decreases over time.

A machine costing 500,000 depreciated at 25% declining balance.

Depreciation follows actual usage: rate per unit = (Cost − Salvage) ÷ Total capacity; the period's charge = rate × units produced in the period.

A machine costing 800,000 with no salvage value, total capacity 400,000 units, produced 50,000 units this year.

Changing the useful life or salvage value is a change in accounting estimate applied prospectively only: spread the remaining net book value over the new remaining life — prior years are never restated.

A machine has a net book value of 240,000 with 4 years remaining; the remaining life is re-estimated to only 3 years.

Routine maintenance and repairs that keep the asset in its condition without increasing its capacity or life are recorded as an expense in the period.

Routine vehicle maintenance of 15,000 paid in cash.

Expenditure that increases the asset's capacity or extends its useful life is added to the asset's cost (capitalized) and depreciated over the remaining life.

A new motor installed in the machine for 120,000 paid from the bank, extending its life by 3 more years.

When selling an asset, remove both its cost and its accumulated depreciation from the books, record what you received, and the difference is a gain or a loss.

A company sells a vehicle: cost 200,000, accumulated depreciation to date 120,000, sold for 95,000 cash.

The vehicle account is credited by its full cost (not the net value) so it disappears from the books completely, and its accumulated depreciation is debited to close it too. Cash comes in at the selling price, and the leftover 15,000 that balances the entry is the gain — a capital gain, shown in the income statement within other income.

If the selling price is below the net book value, the difference is a capital loss recorded on the debit side of the entry.

A machine costing 300,000 with accumulated depreciation of 180,000 (net book value 120,000) was sold for 100,000 by cheque.

If the selling price equals the net book value there is no gain and no loss — the entry simply closes the asset and its accumulated depreciation.

The same machine (cost 300,000, accumulated depreciation 180,000) sold for 120,000.

A fully depreciated asset (accumulated depreciation = cost) disposed of for nothing: close the two accounts against each other with no gain or loss.

Computers costing 80,000, fully depreciated, were scrapped and disposed of.

When an asset is destroyed, remove its full cost and accumulated depreciation immediately and record the casualty loss. The insurance compensation is a separate event: recognize it as a receivable only when the insurer accepts the claim (or collection becomes virtually certain). In our example the claim was approved before the entry, so it may be recorded in the same entry.

A vehicle costing 250,000 with accumulated depreciation of 100,000 (net 150,000) was destroyed by fire. The insurer approved compensation of 130,000, later paid by cheque.

Before recording the entry, determine the nature of the deal. Whether the assets are similar is a useful indicator, but not the decider — the current standard's test is commercial substance: will the expected cash flows (amount, timing, or risk) change as a result of the exchange?

Case 1 — the exchange has commercial substance (the usual case in dealer trade-ins, and typically in exchanges of dissimilar assets): record the new asset at its fair value, close the old asset and its accumulated depreciation, and recognize the gain or loss immediately.

Case 2 — no commercial substance, or fair value cannot be measured reliably (often the case when similar assets used the same way are swapped): no gain and no loss is recognized — the new asset is recorded at the old asset's net book value + the cash paid.

An old truck: cost 350,000, accumulated depreciation 250,000 (net 100,000). Traded for a new truck priced 500,000; the dealer allowed 120,000 for the old truck and the balance of 380,000 was paid from the bank.

Same figures, but the exchange lacks commercial substance (truck-for-similar-truck used the same way, cash flows won't change): the new truck's cost = the old truck's net book value 100,000 + cash paid 380,000 = 480,000.

Under the revaluation model, an increase in the asset's value is recorded in the revaluation surplus within equity — not in the income statement. Exception: if a revaluation loss on the same asset was previously recognized in the income statement, the increase goes to the income statement first up to that prior loss, and only the excess goes to the surplus.

Land costing 1,000,000 revalued to 1,300,000.

A decrease is charged first against any previous revaluation surplus of the same asset; any excess is recorded as a loss in the income statement.

The same land (carried at 1,300,000 with a prior surplus of 300,000) fell in value to 950,000 — a decrease of 350,000.

If the asset's recoverable amount falls below its net book value, write the asset down to the recoverable amount and record an impairment loss in the income statement.

A machine with a net book value of 400,000; due to obsolescence its recoverable amount is estimated at 320,000.

The standard (Egyptian Standard 31 / IAS 36) does not prescribe the credit account: you may reduce the asset account directly, or you may credit a contra account (accumulated impairment, or within accumulated depreciation) so the original cost stays visible — both are acceptable. In all cases, depreciation for the following periods is recalculated on the new post-impairment carrying amount spread over the remaining useful life.

If the reasons for impairment no longer exist, the loss is reversed — capped at what the carrying amount would have been had no impairment been recorded.

Market conditions improved and the machine's recoverable amount rose; the allowed reversal is 50,000.

Intangible assets (software, licenses, trademarks) are recorded at cost. Those with a finite useful life are written off over that life — same logic as depreciation but called amortization. An indefinite-life intangible (like a continually renewable trademark) is not amortized; it is tested for impairment at least annually.

The company bought an accounting-software license for 90,000 from the bank, useful life 3 years — annual amortization 30,000.