Accounting Treatment

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Mayank Sharda (Querist)
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08 August 2009 We are following cash basis of accounting in an hospital.

During the year ended 31st March 2009, we have imported fixed assets, as per the terms of payment we have paid 80% of the amount at the time of import and remaining 20% of payment will the made after assets is started functioning. As on 31st March 2009 we have made only 80% of payment.

My question is that during the year ended 31st March 2009 either we have to capitalised the assets at 80% and claim depreciation on 80% value as we are following cash basis of accounting or we have to capitalised it with 100% and claim depreciation on 100%.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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08 August 2009 Method of Accounting being follwed has nothing to do with quantum of depreciation.

Depreciation will be allowed on the cost of assets acquired and put to use in the manner provided in the respective statute(eg. Income Tax Act).

In my view, even if you capitalise 80% of the cost, in terms of the method of accounting followed, you are eligible for depreciation on 100%.

More over, the hybrid system of accounting is no more allowed.

Please seek more opinion.