Audit Doubts

Srinath (Chartered Accountant) (166 Points)

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