Fixed assets

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

15 March 2013 The company has a policy that assets will be purchased for employees and the cost will be recovered from the employees in the next four years. When the employee will leave the organisation, the asset will be transferred to the employee.

Can the same be treated as a fixed asset and depreciation can be claimed???

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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15 March 2013 Yes.

The asset can be capitalised in books of company and depreciation can be claimed.

The amounts recovered from employees can be shown as advances.

Querist : Anonymous

Querist : Anonymous (Querist)

15 March 2013 Hi Thanks for the reply.

But is this as per the accounting standard??

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CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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15 March 2013 It is not violating any standard.

Let us say a company purchases a car in its name. It can have a policy in which employees are allowed to use company's car for official purposes.

After four years the same would be transfered against the advances received from the employee

Querist : Anonymous

Querist : Anonymous (Querist)

15 March 2013 yes you are correct ....

but are we not recovering the cost on one side and clamining depreciation on other hand....

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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15 March 2013 You are not recovering the cost. You are parking the amount received from employees as a liability which is treated as advance.

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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18 March 2013 you can show it as assets in name of company.
advances received from employee as advances.
whenever transfer the asset show as sale transfer of assets. and accordingly capital gain is applicable.
and claim depreciation for the year till employee is under employment.

Querist : Anonymous

Querist : Anonymous (Querist)

19 March 2013 Thanks everyone..

Actually in this case there is a flexi component in the salary which gets reduced by the amount the asset is procured for fixed period of time...

Then too we can show it as an asset??

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Querist : Anonymous

Querist : Anonymous (Querist)

25 March 2013 Actually in this case there is a flexi component in the salary which gets reduced by the amount the asset is procured...

Then too we can show it as an asset?