Capitalization of tooling with machinery

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2013 Dear Experts

we have purchase machinery to make one product. machine is not product specific , making of product depend upon the tool & die.

query is , whether the tool installed on machinery is capitalized with machine or capitalized separately.

Please elaborate..

CA Pallav Singhania

CA Pallav Singhania (Expert)
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20 November 2013 If such tool enhance the capacity or the life of the machine then it should be capitalized with it..
However, if such tools can be used as the integral part of the machinery then it should be capitalized to machinery account..

Or the Tools can be used even after machinery is been disposed off then its better to capitalized it separately...

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2013 Dear Aryan

Thanks for your reply
We have 3 to 4 similar machines we can use the same tool in any of machine for production purpose.

tools is not integral part of machine but it can not be used without machine.

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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20 November 2013 Then its better to capitalized along with machinery..

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2013 Tools life is only 2 to 3 year & machine life is 20 yrs.

We are facing problem in charging depreciation
If we capitalize with machinery then rate at which we charge dep on machinery is charged on tools also.
but in actual life of tool is 2 to 3 yrs & dep will go till 20 yrs.

?????

CA Pallav Singhania

CA Pallav Singhania (Expert)
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20 November 2013 Then capitalized it separately....

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2013 but the life of tool is 2 to 3 years...
then how can we charge it in current year itself

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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22 November 2013 Life will not decide whether to capitalise but the amount of efficiency whether it increases compared to its previously assessed performance.

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Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2013 Dear Tushar

Agreed from ur point of view but my query is not for old machinery , we are talking at the time when we purchase new machine & for production purpose we need some tools which is fixed in machine for production.

life of machine is 10 yrs & tools is 2 to 3 yrs.

query is , tools purchased first time with machinery is capitalized with machine or separately.