Land
Definition of Land
Land is considered a fixed asset but, unlike other fixed assets, is not depreciated, because land has indefinite life. Land never loses value in an accounting setting. A loss can be recorded when the land is sold if an actual loss occurs.
Valuation of Land
Costs included in the value of land presented on a balance sheet include:
- purchase price
- closing costs:
- title to the land
- attorney's fees
- recording fees
- costs incurred in getting the land in condition for its intended use:
- grading
- filling
- draining
- clearing
- assumption of any liens, mortgages, or encumbrances on the property
- any additional land improvements that have an indefinite life
Other costs included in land account on the balance sheet include special assessments for local improvements, such as:
- pavements
- street lights
- sewers and drainage systems
The reason behind this treatment is that those are relatively permanent and the local government will be maintaining them. Likewise, any permanent improvements by the owner, such as landscaping for example, are also part of the land acocunt on the general ledger.
On the other hand, improvements with limited lives, such as private driveways, walks, fences and parking lots are recorded in a separate general ledger account called Land Improvements and are depreciated over their useful lives.
Classification of Land
Land is generally found in the Property, Plant & Equipment section of the balance sheet. If, however, the purpose behind acquiring and holding land is for speculation, it shouold be classified as an investment. If the company in question is in real estate, it should be properly classified as inventory.
12 Month Cash Flow Template
The best way to manage your cash levels is with a cash flow analysis tool. This cash flow template is this kind of a tool. Lay out your cash inflows and outflows in an organized fashion and monitor your cash balances from day to day or week to week.
Balance Sheet Templates
1, 3 and 5 year balance sheet templates for three different legal entities: LLC, corporation and a sole proprietor.
Balance Sheet Analysis
Learn how to analyze a balance sheet in terms of company's liquidity and solvency using financial ratios such as the current ratio, quick (or acid) ratio, debt to asset ratio and debt to equity ratio.
Return from Land to Sample Balance Sheet
Return from Land to Small Business Accounting
