Title: How to account for land improvements? - Accounting Guide | Simplestudies.com
Headings: How to account for land improvements
How to account for land improvements
Account for land improvements.
1. Nature of land related expenditures
2. Land improvements as part of land cost
3. Land improvements as a separate asset (and cost)
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Content: Land improvements as part of land cost
Land related expenditures in the first category are usually  included in the cost of land acquired. This treatment is consistent with the generally  accepted accounting principles stating that costs related to preparing an asset  for its intended use are to be included in the cost of that asset. Thus, when  a company buys land and needs to remove an old building from it, the removal  costs (less any salvageable items) are added to the cost of land acquired. Note that land is recorded on the balance sheet in a separate  account called Land. Land is a separate asset within Property, Plant, and Equipment. Land is not depreciated because it does not have an expected useful life. Therefore, any land related expenditures in this category will stay on the  balance sheet and will not be depreciated. 3. Land improvements as a separate asset (and cost)
Land improvements in the second category are usually  recorded as a separate asset on the balance sheet in an account called Land  Improvements. Therefore, such expenditures represent separate costs.