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Capitalisation of bundled goods and services received
We have entered into a contract with a supplier for office renovation of a rented property and also supply of furniture for the same property for which the supplier has billed a single amount without bifurcation of the furniture and office renovation expense .Whether this expenditure would be capitalized or not and with what amount.
Replies (4)
There are Two expenses 1) Renovation expenses of rented property 2) Purchase of Furniture ( Asset ) , so please Clarify , Renovation has been done using Furniture or both are different expenses .
Kindly arrange for the same. Contact with supplier.
@ prasad Nilugal both are different expenses , we have entered into a contract with a supplier to renovate our office which includes painting of walls , repair etc and also supply of office furniture for which a lump payment is agreed. So how this expense is to be treated in our books.
If both are different expenses then , you must have ask for for two different Invoices , one for expenses and another for Asset Purchase , then painting and renovation expenses will be Revenue Expenditure , and Furniture you can Capitalise . Only one Invoice for both different expenses will be problematical for Audit Purpose .
Take more Opinion on this .
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