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Capitalistion of asset

Rahul jain (LEARNING & TEACHING) (435 Points)

18 February 2014

DEAR FRNDS....

plz tell me what will be the treatment of transporatation cost, loading,unloading cost with regard to an asset purchase?

is this cost will be add in cost of asset and capitalised or any other treatment?.

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Deepak Gupta (CA Student) (15922 Points)
Replied 19 February 2014

Originally posted by : Rahul jain
	DEAR FRNDS.... plz tell me what will be the treatment of transporatation cost, loading,unloading cost with regard to an asset purchase? is this cost will be add in cost of asset and capitalised or any other treatment?.

Transportation cost, loading and unloading cost will be included in the cost of fixed asset.
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[As per Para 9.1 of AS 10, Accounting for Fixed Assets, the cost of an item of fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price.]

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Rahul jain (LEARNING & TEACHING) (435 Points)
Replied 19 February 2014

dear deepak thnku for ur reply and now my question is that if any part of machinery is repalced but from that part no improvement is generated after installation....can we consider it as a revenue expense?

Deepak Gupta (CA Student) (15922 Points)
Replied 19 February 2014

Originally posted by : Rahul jain
	dear deepak thnku for ur reply and now my question is that if any part of machinery is repalced but from that part no improvement is generated after installation....can we consider it as a revenue expense?

Yes, it will be considered as repairs and debited to the P/L account because the part is replaced to maintain the existing efficiency of the asset and it does not result in any improvement of standard performance (standard means when the asset was purchased or acquired).
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[As per Para 12.1 of AS 10, Frequently, it is difficult to determine whether subsequent expenditure related to fixed asset represents improvements that ought to be added to the gross book value or repairs that ought to be charged to the profit and loss statement. Only expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is included in the gross book value, e.g., an increase in capacity.]

Rahul jain (LEARNING & TEACHING) (435 Points)
Replied 19 February 2014

thnx again dear.....and again my new question is that if any expenditure done on existing furniture as artificial item or u can say just for good looking of office...can we consider it as revenue expense....