Dear members,
Pls tell me what is meant by capitalisation of expenses ? And what is the accounting treatment for that ?
In tally, can we know which are the capitalised expenses and which are not ? How?
Thanks...
4 Replies
Vinit
(CA Final )
(188 Points)
Replied 04 March 2011
Capitalisation of a expense means debiting the Assets to which the expense belongs rather to a expense account. You can check the addition to the Assets account.whether addition made or not , if made it means capitalised.
Shridhi Jain
(Company Secretary)
(1678 Points)
Replied 04 March 2011
Ya thats right , in capitalisation we add the expense to the value of that asset. Are there any guidelines to know which expenses are to be capitalised and which are not...?
Thnks for reply...
Vinit
(CA Final )
(188 Points)
Replied 04 March 2011
Actually it depend upon the nature of expense. some of which are 1)If that expense enhances the capacity of the assets significantly.2) increase the working life of the assets. 3) Expense relating to purchase of new assets. 4) Any other major addition.
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