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Balance sheet - doubt

sai (General Administrator) (24 Points)

13 March 2011

Can any one tell me,

Can is " Research and Development" expenses Capitilized?
How R&D expenses will be qualified? and who will be approving them?

and,

what is the impact if expenses moved to Balance sheet from Profit & Loss sheet?

Thanks in advance,

Sai

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2 Replies

Rachit (Ca-Final Article.) (565 Points)
Replied 13 March 2011

yes Research and development expanditure can be capitalised depending upon the nature on which R&D made and same will appear as a loss in B/s in assets side and same will be write off each year on a permanent basiis.

i dont know who will verify them but may be as i think it will be a Income tax officer while it comes to approval for income tax purpose........................

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 13 March 2011

Originally posted by : sai

Hi

Can any one tell me,

Can is " Research and Development" expenses Capitilized?

How R&D expenses will be qualified? and who will be approving them?

- Example: company is making research on a drug, they brought machines/ lab instruments and chemicals to test the drug, at certain point the drug is ready for markatability , so the machines and equipments which were booked in expenses now comes under plant and machinery / tools and implements and gets capitalized.

and,

what is the impact if expenses moved to Balance sheet from Profit & Loss sheet?
- Profit will get increased with the sum transferred from P/L to balance sheet "assets" with a provision of depriciation available.

Thanks in advance,

Sai