Capitalise

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Divya sharma (Querist)
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01 May 2012 HEAVY RENOVATION IS BEING CARRIED ON
EXPENDITURE RELATED TO
WIRING, WOOD PURCHASED FOR PARTITIONS OF DOORS , OTHER ELECTRICAL ITEMS PURCHASED
SHOULD BE CAPITALISED
UNDER
BUILDING OR
ELECTRIC INSTALLATION
OR FURNITURE & FIXTURE
EVERYTHING UNDER BUILDING OR RESPECTIVE HEADS.
KINDLY CLARIFY

Divya sharma

Divya sharma (Querist)
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11 May 2012 KINDLY RESOLVE.........

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 When deciding whether to capitalize expenditures related to heavy renovation, such as wiring, wood for partitions or doors, and other electrical items purchased, you typically categorize them under specific asset categories in your accounting records. Here’s a breakdown of where these items would generally be capitalized:

1. **Wiring and Electrical Items**:
- These are typically considered part of the electrical installation.
- They would be capitalized under **Electrical Installation**.

2. **Wood for Partitions or Doors**:
- These items are considered part of the construction or structural improvements within the building.
- They would be capitalized under **Building**.

3. **Other Renovation Costs** (e.g., plumbing fixtures, flooring, etc.):
- Each type of cost should be assessed based on its nature and how it contributes to the improvement of the building.
- For items like plumbing fixtures, they would be capitalized under **Building**.
- Flooring and similar improvements would also generally fall under the **Building** category.

4. **Furniture and Fixtures**:
- Furniture and fixtures are distinct from structural elements or installations.
- They would be capitalized under **Furniture & Fixture**.

### General Guidelines for Capitalization:

- **Building**: Includes structural components and improvements to the building itself, such as walls, roofs, floors, ceilings, doors, windows, etc.

- **Electrical Installation**: Covers wiring, electrical panels, fixtures, and other electrical components necessary for the functioning of the building.

- **Furniture & Fixture**: Refers to movable items such as desks, chairs, cabinets, and other furnishings used in the building.

### Accounting Treatment:

- **Capitalization**: When you capitalize an expense, you record it as an asset on the balance sheet rather than expensing it immediately on the income statement. The capitalized amount is then depreciated or amortized over its useful life, reflecting the matching principle in accounting.

- **Expense Recognition**: If these expenditures do not significantly enhance the value or extend the useful life of the asset beyond its original condition, they are typically expensed as incurred.

### Conclusion:

To ensure proper accounting treatment, it’s essential to categorize each expenditure based on its nature and its impact on the building’s structure, installations, or furnishings. Consulting with a qualified accountant or financial advisor can provide specific guidance tailored to your company’s circumstances and compliance with accounting standards. This approach ensures that your financial statements accurately reflect the capital improvements made to your property and comply with relevant accounting principles.

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