Treatment of an entry

This query is : Resolved

Mekhala (Querist)
Follow

19 September 2012 Dear all,

Please tell me:

I have purchased a monoblock pump for the first time ina manufacturing unit...i have capitalised it....after some time the motor got spoilt and it is sent for reparing...in the mean time i order for another motor and start my production....will the second motor also be capitalised of it is a repairs and maintenance cost???

Guest

Guest (Expert)

19 September 2012 The second motor should be charged to repairs and maintenance expenses a/c for following reasons:
1. The second motor has replaced the original motor. Hence the capacity of the asset is same.
2. As there is no increase in capacity it is not proper to capitalise the second motor which merely replaces the first motor.

SANYAM ARORA

SANYAM ARORA (Expert)
Follow

19 September 2012 I think the second motor should also be capitalized due to following reasons -

a)As the first motor have been used for some time, so its capacity would have definitely reduced.

b) So if we have replaced it with the second motor, their respective capacity can never be same.

Upgrade to CAclubindia Pro. Subscribe Now!

SANYAM ARORA

SANYAM ARORA (Expert)
Follow

19 September 2012 Let me tell you with the help of an example -

Motor A Purchased On 1.4.2011 ( Capacity - 60 ) & it has been used in the Machine for 5 months. Till date it has been used at capacity of 50. If it got spoil, therefore it would have reduced his capacity also.

Meanwhile we purchase another motor working at a capacity of 60, so the capacity has been increased now.

So it should be capitalized.

Regards

Sanyam

SANYAM ARORA

SANYAM ARORA (Expert)
Follow

19 September 2012 There is contradiction in reply of me & Ketan sir.

I request other experts to share there views.