23 June 2008
Sir, 1.A sea going ship replaces its hull(engine)due to mechanical failure.the ship has been accounted as a single asset along wiith the engine, in the fixed asset register.the engine is of same capacity as the earlier one. should the the expenditure be treated as capital or revenue? will the treatment differ if the engine is of enhanced capacity? 2.A car parking shed is constructed attached to a building and is integral part of the building. if the building is demolished the shed will loose its utility value and has also to be demolished. hence it has the same life as that of the remaining life of the building.the capacity of the building is increased as it is able to provide parking facility which it did not have earlier.should the the expenditure be treated as capital or revenue?
23 June 2008
sir please give reasoning in detail to treat both as capital expenditure. because in both the examples engine as well as car shed cant be used in isolation when the ship is scrapped and the building is demolished respectively though they may have more useful life left than their parent assets.
CAclubindia
