What is Plant and Machinery Verification in Accounting?
Plant and Machinery Verification: Usually the money spent on the acquisition of plant and machinery is shown in one account i.e. Plant and Machinery Account. The auditor should check the balance sheet with the help of ledger accounts and ensure that the asset is clearly stated. The asset is to be verified and the entries relating there to have to be vouched by reference to the original invoices, correspondence etc.
- The auditor should examine the plant register in which particulars about the cost, records about sales provision for depreciation etc are available.
- If a part of the asset has been purchased during the year, the purchase should be vouched by reference to the invoice to the relevant vouchers.
- If a part of the asset is sold out, it should be seen that the necessary entries have been passed at proper places. Profit or Loss arising out of the sales has been duly recorded.
- To see the mortgage or charge on the asset, the auditor should look to the details given in the plant register.
- Plant and Machinery is to be valued at its going concern value. It should be shown in the Balance Sheet at cost less depreciation.
- Depreciation is deducted from cost and repairs and renewals are charged to revenue account.
This is the usual practice but if revaluation method is adopted for its valuation the auditor should examine the valuation sheet.