Whether insurance charges & r.t.o.reg charges capitalised?

This query is : Open

arun laxman gaikwad (Querist)
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04 November 2016 Dear Sir

Dear Experts

We purchased a vehicle for our Company.
Vehicle dealer raised invoice with basic price of vehicle, insurance, r.t.o. regt. charges and accessories.

While capitalising the vehicle in the company's books of accounts as fixed asset, other than basic price can we capitalise insurance, r.t.o. regt. charges, road tax, accessories and extended warranty charges for further 2 years.

These charges charged by vehicle dealer in his invoice.

Please advice at the earliest.

Arun Gaikwad

sundharabahu

sundharabahu (Expert)
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04 November 2016 As per AS 10 all expenses which are incurred and necessary to put an asset to use can be capitalized be they direct or indirect. If the car is to ply on road at the first time, if regn, road tax, and insurance is necessary the same may be added to the price of the car. But s regards warranty to replace or repair during period after car is put to use , say upto an extended period of two years, the same is in the nature of revenue only and cannot be capialized just because it is paid along with the cost of car before hand