Definition: Ordinary repairs are low dollar amount, common repairs to maintain equipment in good working condition and make sure the factory operates smoothly. Ordinary repairs are expensed when incurred and are not capitalized because of they do not extend the asset’s useful life or productivity.
In other words, ordinary repairs are simply maintenance costs to make sure the machinery or equipment is working properly. These repairs do not improve the equipment or make it last longer.
Let’s take a company vehicle for example. An ordinary repair on a company vehicle would be replacing a tail light or replacing the tires when they get worn out. Neither of these repairs extends the life of the vehicle or makes it any more productive.
These repairs are just ordinary maintenance repairs during the life of the asset. Some other examples include changing the oil, cleaning the car, and other small repairs like alignment adjustment.
What Does Ordinary Repairs Mean?
A repair that isn’t considered an ordinary repair to this company vehicle is an engine replacement. Assume after a few years the company car has a problem with the engine and there isn’t enough room in the budget to replace the car with a new car. Management might decide to replace the engine in the car instead.
This is not only a significant repair as far as total dollars go; it also extends the life of the car and makes it more productive. This engine replacement would be considered a betterment and would be capitalized.