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capitalization

userrr (Accountant) (137 Points)

23 January 2019

what is capitalization of fixed assest

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CA Naveen Chand (Chartered Accountant) (12729 Points)
Replied 23 January 2019

capitalization of assets means take benefits of assets over the economic life , not in once.

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userrr (Accountant) (137 Points)
Replied 23 January 2019

plz give me any example

Prakash Gehani (Consultant & Teacher(Whatsapp 8718057907)) (1306 Points)
Replied 24 January 2019

An expense shall be capitalise:
If new asset is acquired,
If new asset is constructed,
If it results in increase in revenue generatin capacity,
If it results in increase in effiviency,
It provides enduring benefit.

Basically capitalise means such expense will be part of cost of asset and will be written off in no. of years, as such expense provide enduring benefit.

for eg. Wages paid to labour for construcion of building will be debited to building account instead of wages account, installation charges on machinery will be debited to machinery account instead of Installation charges account.