How to write accounting entries for foreign investment
When an enterprise invests abroad, it should be included in the "long-term equity investment" account for accounting. However, when different assets are used for external investment, the credit account of the accounting entry will be different. How to prepare specific accounting entries?
Accounting entries for foreign investment
1. Accounting entry of external investment with cash
Debit: long-term equity investment
Credit: bank deposit
2. External investment with inventory (invested inventory shall be regarded as sales)
Debit: long-term equity investment
Credit: main business income
Tax payable - VAT payable (output tax)
Debit: main business cost
Credit: inventory goods
3. Foreign investment with fixed assets
(1) First clean up the fixed assets for external investment
Debit: disposal of fixed assets
Accumulated depreciation
Credit: fixed assets
(2) When clearing costs occur
Debit: disposal of fixed assets
Credit: bank deposit/cash on hand
(3) When investing fixed assets
Debit: long-term equity investment
Credit: disposal of fixed assets
(4) When profit or loss occurs
① When there is surplus
Debit: disposal of fixed assets
Credit: non operating income
② In case of loss
Debit: Non operating expenses
Credit: disposal of fixed assets
4. Foreign investment with intangible assets
① When there is surplus in foreign investment at the appraisal price confirmed by both parties
Debit: long-term equity investment
Accumulated amortization
Credit: intangible assets (original value)
Non operating income
② When losses occur in foreign investment at the appraisal price confirmed by both parties
Debit: long-term equity investment (the evaluation price confirmed by both parties shall be used for external investment)
Accumulated amortization
Non operating expenses
Credit: intangible assets (original value)
What is long-term equity investment?
Long term equity investment refers to obtaining the shares of the invested entity through investment. An enterprise's equity investment in other entities is usually regarded as long-term holding, and it can control the invested entity through equity investment, or exert significant influence on the invested entity, or establish close relationship with the invested entity to diversify business risks.