21 May 2009
HI please suggest me that can tyres replaced of bus be trested as revenue expenditure or we can take them as capital exp. ,according to the provisions of AS-10, THANKS IN ANTICIPATION
21 May 2009
The abovce mentioned transaction cannot tell as revenue as repeatability is the main test for the revenue at the same time it canot be capital expenditure as the value is negligible hence it is expened out in the year in which the expenses incurred.Just like repairs.This is for your information.
21 May 2009
This is an expenditure on the maintenance of the the vehicle to keep the vehicle fit for usage / road worthy. The value of the items is not determinative factor, the nature of expenditure is more important in determination of the capital or revenue expenditure. If by incurreing an expenditure no new asset comes in existance, the expenditure whether big or small, can not be treated as capital. In the instant case also, the tyres replaced are only to keep the bus in running conditions, no new assets is being created, hence this is an expenditure in the nature revenue,
21 May 2009
Very right rajesh... if by incurring an expendiure the new asset is bring in to force or enhancing the capacity of the asset, then it is capital in nature , because there is a benefit of enduring nature.on the other hand the expenditure incurred to maintain the asset in its orginal condition , then it is reveue in nature
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