29 July 2013
An entity(not a company) is engaged in running one Pre-nursery school and planning to open many more in future under a brand name.
For now FY13-14 they are incurring expenditure for food as meals for children and buys raw material like milk, fruits etc. Though this expense is revenue , I want to know the treatment of Kitchen crockery & cutlery and appliances like oven,juicer, stove etc, whether they are to be capitalised or not. If they are to be capitalised then what should be rate of depreciation and if they are to be amortised, then the manner and disclosure in notes on accounts
Also they have incurred hugh expense over toys ( vehicles, animals, first aid etc) for around 10 lacs, in addition to that they also bought a jumbo micky house alone costing near 4lacs, whether all these should be capitalised and what should be depreciation rate?
In FY12-13 they have incurred expenditure both revenue and capital but no commencement of business happen, whether revenue expenditure be treated as pre-operative expenditure? It should be capitalised to fixed asset or treated as Deferred revenue expenditure?
01 August 2013
All such fixed assets need to be capitalised. Depreciation rate in case it is a company need to be equal to or higher than 13.91%
For other than company, there is no such minimum rate of dep.
Ascertain the estimated useful life of the assets and depreciate them accordingly, disclose the rate of depreciation used in financial statements
Revenue expenses need to be accounted in P&L if they are not incurred in connection with the construction of an asset. Especially corporate expenses such as audit fees etc need to be taken to P&L in any case
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