Dear All,
I have doubt in accounting area. Say for example we had purchased a machinery (which is a set of machines, each one is separately marketable / identifiable) for Rs. 40 lakhs some years back. It was installed by the seller and he raised a single bill for this entire Rs. 40 lakhs. We capitalized and accounted as a single asset. Now the WDV is say for example Rs. 20 lakhs. Now one of the machines of this set got worn out. That machine was 10% of value of total value of machinery at the time of purchase. That is Rs. 4 lakhs, WDV is Rs. 2 lakhs. We plan to replace it with new machine to the value of Rs. 6 lakhs. The scrap value is Rs. 25000/-. I have questions on two issues 1) Whether Rs. 6 lakhs is a revenue expenditure or capital expenditure as there will not be any increase in capacity. 2) How to account the loss of Rs. 1,75,000/- (Rs. 2 lakhs less Rs. 25000/-) as it is not directly available in the books. Presently this machine cost is not in the same proportion (10% of total value of the machinery) when it was purchased.
Thanks
Srikanth.
CAclubindia
