Insurance premium paid on Capital iitem

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Ganesh (Querist)

29 September 2008 Can anyone let me know whether the insurance premium paid on plant& machinery and capitlaised be mortgaged?

Since the premium amount is already paid for, is it coreect that the same can be mortgaged? Kindly give me atechnical reasoning.

Thanks in advance.

Ganesh

CMA Jitendra Singh

CMA Jitendra Singh (Expert)

29 September 2008 Generally ,Insurance permium are paid in annual basis and if P & M things are going to be mortgaged fo short period ,same can be capitalized.

But in long term mortgage ,capitalization of insurance premium does not make any sense

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)

30 September 2008 Insurance premium is to be amortised over the period of cover as the same is in the nature of a revenue expenditure and a renewal premium is required to be paid on the expiry of the relevant period to keep the insurance in force.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

30 September 2008 Recurring annual insurance premium paid are to be treated as revenue.

CA Bosu babu

CA Bosu babu (Expert)

01 October 2008 I agreed with first 2 answers

CA V. Mohanakrishnan

CA V. Mohanakrishnan (Expert)

01 October 2008 marine insurance premium being paid when the plant & machinery is brought for installation shall be capitalised as part of the plant and machinery.

any insurance premium post installation of plant and machinery would be a revenue expenditure to be charged to profit and loss account over the premium period

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