Question

Question: What is the difference between ordinary repairs and extraordinary repairs? How could each be recorded?

Short answer

Ordinary repairs are expenditure which does not extend the life of an asset beyond its original estimate whereas extraordinary repairs extend the asset’s useful life beyond its original estimate.

Step-by-step solution

Ordinary repair

Ordinary repairs are expenditures to keep an asset in normal, good operating condition. Ordinary repairs do not extend an asset’s useful life beyond its original estimate or increase its productivity beyond original expectations. Examples are the normal costs of cleaning, lubricating, adjusting, oil changing, and replacing small parts of a machine. Ordinary repairs are treated as revenue expenditures.

Extraordinary repairs

Extraordinary repairs are expenditures extending the asset’s useful life beyond its original estimate. Extraordinary repairs are capital expenditures because they benefit future periods. Their costs are debited to the asset account (or to Accumulated Depreciation).