This document outlines accounting guidelines for classifying costs as relating to land, buildings, or improvements. It provides examples of costs that are typically charged to the land account, such as surveying and clearing costs. Building costs include materials, labor, permits, and fixtures that become a permanent part of the structure. Improvements to land like fences or landscaping that are depreciable are charged to land improvements. The document also discusses how to classify costs for items like sidewalks, insurance claims, and ventilation systems depending on the context and timing of the expenditure.

1. CHAPTER 26
CHAPTER 26
LAND AND
LAND AND
BUILDING
BUILDING

3. Cost Chargeable to land

4. i. Cost of survey
j. Payments to tenants to induce them to vacate the land in order
to prepare the land for the intended use but not to make room for
the construction of new building.
k. Cost of permanent improvements such as cost of clearing. cost
of grading, leveling and landfill
l. Cost of option to buy the acquired land. If the land is not
acquired, the cost of option is expensed outright. m. Special
assessment taxes paid by landowner as contribution to the cost
of public improvement

5. Building Account
The following expenditures are normally charged to the building account
when building is acquired by purchase:
a. Purchase price
b. Legal fees and other expenses incurred in connection with the purchase
c. Unpaid real property taxes up to date of acquisition assumed by buyer.
However, real property taxes subsequent to acquisition should be charged to
expense.
d. Interest, mortgage, liens and other encumbrances on the building
assumed by the buyer e. Payments to tenants to induce them to vacate the
building
f. Any renovating or remodeling costs incurred to put a building purchased in
a condition suitable for the intended use such as lighting installations,
partitions and repairs.

6. The following expenditures are normally charged to
the building when acquired by means of construction:
a. Materials used, labor employed and overhead
incurred during the construction
b. Building permit or license
c. Architect fee
d. Superintendent fee
e. Cost of excavation
f. Cost of temporary buildings used as construction
offices and tools or materials shed

7. g. Expenditures incurred during the construction period
such as interest on construction loans and insurance.
h. Expenditures for service equipment and fixtures made
a permanent part of the structure.
i. Cost of temporary safety fence around construction
site and cost of subsequent removal thereof. However,
the construction of a permanent fence after the
completion of the building is recognized as land
improvement.
j. Safety inspection fee

8. Land Improvements
Land improvements not subject to depreciation are
charged to the land account. Examples are cost of
surveying, cost of clearing, cost of grading, leveling and
landfill and cost of subdividing.
On the other hand, depreciable land improvements are
charged to land improvements. Examples are fences,
water systems, drainage systems, sidewalks, pavements
and cost of trees, shrubs and other landscaping.

9. Sidewalks, pavements, parking lot, drivewasy
Such expenditures are charged to the building account.if
part of blueprint for construction of new building.
On the other hand, such expenditures occasionally made
or incurred not in connection with the construction of a
new building are charged to land improvements.

10. Claims for damages
Where insurance is taken during the construction of a
building, the cost of insurance is charged to building
because it is a necessary and reasonable cost of bringing
the building into existence.
However, where insurance is not taken and the entity is
required to pay claims for damages for injuries sustained
during the construction, the payment for damages should
be expensed outright. The damages reflect management
failure or negligence in procuring insurance.
To charge the damages to the building would be tantamount
to concealment of the management failure or negligence.

11. Building fixtures
Expenditures for immovable shelves, cabinets
and partitions should be charged to the building
account.
On the other hand, expenditures for movable
shelves, cabinets and partitions should be
charged to furniture and fixtures.

12. Ventilating system, lighting system, elevator
If installed during construction, the
ventilating system, lighting system and
elevator should be charged to building.
Otherwise, the expenditures for
ventilating system, lighting system and
elevator should be charged to building
improvements.

13. Thank you
Thank you