How to capitalize civil/construction expenditure @ plant con

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

22 February 2011 Dear Sir,

Our company constructing a steel manufacturing mini plant. In case of capitalization, every thing is o.k. But if I come to Civil Works expenditure, how to capitalize these civil works expenditure asset wise.

Present we are just debiting expenses to like total cement cost, total steel cost, total labour expenses etc. How to divide these expenses asset wise.

I am thinking about three options. But I dont know which one is correct option.

1) Debiting total expenditure to a particular asset (i.e., cement, steel, labor, sand etc.) After completion of plant dividing these total expenditure asset wise based on estimated cost.

2)Debiting expenses to particular cost a/c (cement), after getting data from Civil Works department, passing a Journal Entry EX;-
Asset A/c Dr.
To Cement/Steel A/c

3) Capitalizing at the time of purchase itselt, based on estimated/actual cost.
Ex:-
Building 1 A/c
Building 2 A/c
Foundations A/c
To Cement Supplier A/c

But the 3rd option is not possible in actual time.

Sorry, if there is any confusion in my explanation said above.

Thank you all,
Swamy

avdhesh varshney

avdhesh varshney (Expert)
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24 February 2011 option 1 will not do good !

and as per u said op 3 is nt tenable now.

u can try 2nd option ! its the best among the three !

coz until u get the data from the civil engineer u cant make actual assessment.

good luck !

Querist : Anonymous

Querist : Anonymous (Querist)

24 February 2011 Thank you Shri Avadesh Varshney, for your valuable suggestion.

Others views/suggestions are also invited...
Thank you all...
Swamy.K

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