Extraordinary Repairs


DEFINITION of 'Extraordinary Repairs'

Unusually extensive maintenance work performed on a piece of machinery to increase its useful life by over a year. Ordinary repairs are maintenance items necessary to keep machinery functioning, which are anticipated by the initial estimate management makes about the asset's useful life. For example, ordinary repairs might include getting an oil change on a vehicle, while extraordinary repairs would include replacing a transmission with a new model that extends the car's expected life.

BREAKING DOWN 'Extraordinary Repairs'

The accounting treatment of ordinary versus extraordinary repairs is different. Ordinary repairs are simply recorded as expenses in the current period, and the book value of the asset remains unchanged. On the other hand, extraordinary repairs can increase the book value of the asset, increasing depreciation expenses in future periods. Extraordinary repairs are capitalized.

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  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>

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