Insurance premium- on fixed asset

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santosh ramchandra shinde

santosh ramchandra shinde (Querist)
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21 June 2014 Insurance premium paid on insurance of fixed asset is capital expenditure OR revenue expenditure.????

Sandeep Dharar

Sandeep Dharar (Expert)
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21 June 2014 For First year insurance capitalize it. For following years book it as revenue expenditure(P&L A/c)

CA Yugal Purohit

CA Yugal Purohit (Expert)
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21 June 2014 Capital expenditure is the expenditure which improve the life of assets and increase the efficiency of the assets, therefore insurance premium paid on fixed assets is neither improve the life of assets nor improve the efficiency therefore it is revenue expenditure.

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CA Yugal Purohit

CA Yugal Purohit (Expert)
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Sandeep Dharar

Sandeep Dharar (Expert)
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21 June 2014 But Jugal we have to capitalize the insurance premium for first year.

santosh ramchandra shinde

santosh ramchandra shinde (Querist)
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21 June 2014 First Year Capitalized or Not?

Sandeep Dharar

Sandeep Dharar (Expert)
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21 June 2014 It will b capitalized for ist year and treated as revenue for the following years. This is the practical method.

Rupesh Jain

Rupesh Jain (Expert)
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21 June 2014 it is revenue expenditure and charge to profit & loss a/c
it not increase the assets life or useful life or not related to mfg of assets

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Sandeep Dharar

Sandeep Dharar (Expert)
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21 June 2014 Rupesh plz update urself.

mehulmukati

mehulmukati (Expert)
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22 June 2014 For all years it is a revenue expenditure as it does not increase / maintain life of asset

only insurance allowed to be capitalised is for transit

CA Yugal Purohit

CA Yugal Purohit (Expert)
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24 June 2014 mehulmukhti is right, only transit insurance is capitalized and rest are revenue.