Capitalization

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sujit (Querist)
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06 July 2011 Amount paid for purchase of a part of a machinery which is having a life of less then a year but costing Rs 30000/-. Will it be capitalize or not?? Please provide me case study with suggestion.

CMA Nishad Patkar

CMA Nishad Patkar (Expert)
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07 July 2011 Dear Sujit,

Amount is not a factor of consideration to decide , whether the expenditure is revenue or capitalized. A main condition of capitalization is that any asset expected to be used for more than one accounting year. Since the asset's life is less than a year and expected to use less than a year, it is treated as revenue expenditure in the year of acquisition.

Regards,

Nishad