Capitalisation of an Expenditure

Expenditure is to be capialised, only when it enhances the performance of the machinery or increses its efficiency, productivity. Hence, no need to capitalise the expense.

Regards,

Devendra

AGREE WITH DEVENDRA

It is clear that you have changed the same bcoz of lesser output, non - efficiency or etc. So recorded the same as capital expenditure.

As per IFRS number 10 there is certain situation you can capitalised  this motor if the motor has a life more then One year.

AS PER TAXATION NORMS IF THE EXPENDITURE IS NOT PROVIDING ANY ADDITIONAL INCOME GENERATING CAPACITY THEN IT IS DEBITED TO P AND L BUT AS PER ACCOUNTING STANDARDS ANY THING WHICH HELPS YOU EARN INCOME FOR MORE THAN A FIN YEAR IS TRATED AS ASSET AND THE NEW PART BEING REPLACED IF EVEN IT HELPS TO RUN THE ENTIRE SYSTEM FOR MORE THAN ONE YEAR SAY ENEN TWO OR THREE YEARS IT CAN BE CAPITALIZED.

the concept of Capitalization arises only when it increases the production capacity or increases the revenue to the organisation

I dont agree with wat  Mr Nimit says. To Capitalise or not catpitalise is to be done as per AS 10 Accounting of Fixed asset.

@ Nimit first of all ther is nothing called as INCOME TAX NORMS there are provision under Income Tax Act.& Rules under Income tax act.

Income tax act is useful for calculating income   & alowable expenditure under IT ACT.

The q is regarding booking of  Accounting entry  which is based on a/cing concepts n standards.

IN MY VIEW WAT DEVENDRA SAYS IS CORRECT.

I THINK YOU SHOULD CAPITALIS IT, IF VFD MOTOR LIFE IS MORE THAN A YEAR

crystal clear...capital exp

any exp which fprms an integral part of an asset is to b capitalised , devendra is right