IPCC
This query is : Resolved
10 March 2011
QUESTION 1
A newly set up Private Company has incurred the following expenditure during construction period..Please classify as Capital or Revenue:
Sundry Expenses such as stationery , Printing, postage, telephone & local conveyance.
ANSWER IN PADUKA PUBLICATIONS
They constitute an expenditure indirectly which is indirectly related to construction & HENCE capitalized..
IS THIS CORRECT??
QUESTION 2
A minor fire occurred to a machinery cost of repairing is 5000/- estimated.
But company instead used new technology to replace burnt part with new part which will increase efficiency..total cost 50000/-
ANSWER IN PADUKA PUBLICATIONS
Entire 50000 should be capitalized.
I feel only 45000(50000-5000) should be capitalized.
Please assist.
Thank you
K R Srinath
A newly set up Private Company has incurred the following expenditure during construction period..Please classify as Capital or Revenue:
Sundry Expenses such as stationery , Printing, postage, telephone & local conveyance.
ANSWER IN PADUKA PUBLICATIONS
They constitute an expenditure indirectly which is indirectly related to construction & HENCE capitalized..
IS THIS CORRECT??
QUESTION 2
A minor fire occurred to a machinery cost of repairing is 5000/- estimated.
But company instead used new technology to replace burnt part with new part which will increase efficiency..total cost 50000/-
ANSWER IN PADUKA PUBLICATIONS
Entire 50000 should be capitalized.
I feel only 45000(50000-5000) should be capitalized.
Please assist.
Thank you
K R Srinath
11 March 2011
Reply to your 1st Question YES.
Reply to your 2nd Question `Only if the estimated useful life is increased' the expenditure gets qualified for capitalisation, otherwise total amount needs to be treated as Revenue expenditure'.
Reply to your 2nd Question `Only if the estimated useful life is increased' the expenditure gets qualified for capitalisation, otherwise total amount needs to be treated as Revenue expenditure'.
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18 March 2011
Reply to your 1st question:
As per me those expenses are preliminary expenses and thus it should be spread for 5 year, claiming 1/5th each year.
As per me those expenses are preliminary expenses and thus it should be spread for 5 year, claiming 1/5th each year.
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