94 – Equipment Repairs and Rental

Overhead Expenses

 

Synopsis

Account 94

Debits

Credits

  1. The expense for maintenance and repairs to furniture, signs, and equipment used in the retailer activity.

  2. The expense of renting or leasing office equipment, signs, etc., used during regular retailer activities.

 

 

Remarks:

Maintenance and repair costs are those which ordinarily do not add to the value or prolong the life of the asset.

Control of these expenses may be affected through the use of purchase orders.

Charges to this account should include such items as: repairs to furniture, signs, and office equipment; maintenance to preserve the asset and to prevent future breakdown; replacement parts; and equipment maintenance contracts.

Some equipment lease agreements are in effect installment purchases rather than actual lease contracts; therefore, the retailer must look to the substance of the agreement rather than its form.  Equipment purchased on a lease-purchase arrangement should be recorded as an asset and depreciated over its anticipated useful life.  The liability for the lease-purchase should also be recorded.  Subsequent payments would then be charged against the liability account.

The rental and/or lease of computers and software should be charged to Account 77 – Data Processing.