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Fixed assets rs. 5000

Shivani (Learner) (1881 Points)

07 August 2014

Dear Friends

earlier when there was a fixed assets of a value less than equal 5000, we used to charge 100% depreciation and finish it off in the FY itself.

but with the new companies act 2013 there is no such provision any more.

what will be the position in the new scenario.

thanks

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12 Replies

(Guest)

According to the companies act 2013 all expenditure of the capital nature is capitalized in the books of accounts irrespective of the value and depreciation is admissible on that.

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Akhil Manohar (Article & Audit Assistant) (85 Points)
Replied 08 August 2014

You have to charge the depreciation as per the companies act....

Also look forward for the Income tax's allowance of depreciation

CA. Mayur (Service) (147 Points)
Replied 08 August 2014

Theoretically it is correct to say that now companies are required to depreciate assets below Rs. 5000 as per Schedule II of Companies Act 2013 (useful life of assets). However I am yet to see any company that has capitalised such assets during the first quarter of 2014. So in my view Company can stick to policy of charging 100% depreciation on such assets as they were following under schedule XIV of Companies Act 1956, considering that it will not have any material impact on financial statements.

Shivani (Learner) (1881 Points)
Replied 08 August 2014

Dear Mayur

I bought a stapler for my coaching class. it costed me Rs. 100.

i have been using it for last 4 years.

now is this a fixed asset?

i dont see this stapler going anywhere till my hair turn white.

so what shall i do ?

show it as fixed asset and depreciate it over 25 years at Rs. 4 per year.

thats how it seems in light of companies Act 2013

and what about the case where i am not a company and not bound by companies act anyway.

or shall i write it off in the year of purchase at 100% depreciation.

please throw some SUNlight on it.

regards

CA. Mayur (Service) (147 Points)
Replied 08 August 2014

Dear Shivani,

As I mentioned in my response, I hadnt seen any company being capitalising assets less than Rs. 5000 even after Companies Act 2013 become applicable. So in my view you can depreciate such assets by charging 100% depreciation in year of purchase itself even when you are company. Since the amount of such assets are not material.

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Ashish Tewani (CA Final Article at V.P. Mehta & Co.) (83 Points)
Replied 21 August 2014

Agreed with C.A. Mayur. I would also like to add something.

There is this so called Principle of Materiality in force. It says, if an expenditure seems of capital nature, but the amount of it is not material, then it can be charged wholly as an expense for the year of expenditure. So expenses such as purchase of calculator, stapler, pen, eraser, etc. shall be charged to P & L A/c wholly.

Is there any doubt that remains Ms. Shivani?

Bhaavna (Queen ) (1933 Points)
Replied 21 August 2014

i agree al the above replies. shivani:) its simple we dont prepare f.stts 4 a petty shop and there is no need of huge amt to run petty shop. COMPANY is the person 4 wich capital is a pool of huge little amounts and carrying buisenes on a huge basis. your own home is different from d stapler or dustbin, both wil stay with you til ur hair becomes gray, but you cant live with shelter and your volume money matters and purpose also matters after money. while going thru subject just to assume you dealing wit

Sandeep Diwan (service) (129 Points)
Replied 01 August 2015

As ICDS also become effective know and there is not materilaty concept there and there is no limit of Rs 5000 in income tax. In such case assessing officer may disallow the such expense as the defination fixed asset say "Tangible fixed asset" is an asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business. In such case stapper calculator may be treated as fixed asset or we have to shown such item as statioanry items.

KRISHNAMURTHY M (CA In Practice) (26 Points)
Replied 26 August 2016

Can a Private Limited Company have a policy of not capitalising any expensiture below a threhhold limit say Rs.100,000. Is it permissable under the companies Act.

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