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Fixed assets-purchase of items for staff welfare

Jyothis (Article) (1127 Points)

05 March 2016

A company providing software services has purchase the following during the year

What all items are to be capitalised & others as expenses

1)- Purchase Monitor-Rs.8500/-,Mouse-Rs.500/- &SMPS Rs.1000/--(Single invoice Rs.10,000)

Item was purchased as replacement of existing working PC - So can it be accounted as Expense Or Mointor to be capitalised & other as expense in head "Computer consumables & Services".

2) Table tennis court was purchased & Installed in office premises for Staffs Costing Rs.26,000/-

Can it be accounted as "Staff welfare expense" Or is it mandatory capitalise items purchased for staff's welfare.

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6 Replies

Ajit Hegde (CA - Final) (1367 Points)
Replied 06 March 2016

Capitalise in both the cases. Even the mouse, part of the computer can be capitalised. And the old item you have sold should be credited or to be shown as disposal/sale during the year.

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Asad Zia (Accountant) (87 Points)
Replied 06 March 2016

Sir i would like to ask a query plants and flowers pots were puchased for office. Will it be classified to office expense or any other expense Cost was around 20000/-

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Saliq Ansari (CA_Final Student) (885 Points)
Replied 06 March 2016

Originally posted by : Jyothis
	A company providing software services has purchase the following during the year What all items are to be capitalised & others as expenses 1)- Purchase Monitor-Rs.8500/-,Mouse-Rs.500/- &SMPS Rs.1000/--(Single invoice Rs.10,000) Item was purchased as replacement of existing working PC - So can it be accounted as Expense Or Mointor to be capitalised & other as expense in head "Computer consumables & Services". 2) Table tennis court was purchased & Installed in office premises for Staffs Costing Rs.26,000/- Can it be accounted as "Staff welfare expense" Or is it mandatory capitalise items purchased for staff's welfare.

Case 1

Whenever there is improvement or repairs in an asset then it should be capitalised only when such repair or improvement results in increase in the performance of the asset beyond its previously assessed performance.

In your case those parts are essential parts of computer and would result in better performance hence it should be capitalised.

Case 2

Fixed Assets means " Asset held with the intention to use for producing goods or providing services and are not held for sale in normal course of business.

The Table tennis court installed to provide service to Employee hence it should be booked as Fixed Asset.

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Saliq Ansari (CA_Final Student) (885 Points)
Replied 06 March 2016

Originally posted by : Asad Zia
	Sir i would like to ask a query plants and flowers pots were puchased for office. Will it be classified to office expense or any other expense Cost was around 20000/-

The Plants and Flower pots are usually bought for butification, Treatment of it should be to charged to Statement of P&L

Mohan (Audit Assisstant & Accounts Manager) (489 Points)
Replied 07 March 2016

So far as comouter parts are concerned, you can caitalise it provided wdv of same parts in existing comouter are seperately calculated written off to p & l account else you will have comter overvalued by the vakue of arts which no longer can be used. The second option is debit to p & l account the new purchase of parts under repairs.