Title: How to Account for Capital Improvements | Bizfluent
Headings: How to Account for Capital Improvements
How to Account for Capital Improvements
Record the Capital Improvements
Record Depreciation
Tips

Content: For example, improvements to the office building would be “Building Improvements.” Record the entire amount of the capital improvement cost as an increase to the Improvements general ledger account. 00:00
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Record the entire amount of the capital improvement cost as a decrease to the checking account used to pay for the improvement. Record Depreciation
Determine the useful life of the improvement as designated by the Internal Revenue Service (IRS). For example, the useful life of a fence is 15 years. Depreciation information is available on the IRS website. Elect a depreciation method. Most fixed assets are depreciated using the Modified Accelerated Cost Recovery System, or MACRS, method of depreciation, but the IRS allows you to elect a different method for certain types of property. Calculate the annual depreciation on the capital improvement using the IRS provided rates and calculation methods for the elected depreciation method and useful life. Create an account in the Fixed Asset section of the general ledger called “Capital Improvements Depreciation.”