interest for rs 150000 for purchase of assets for the month jan-march 09 was not charged in the financial year 2008-2009.
assets was put to use date in april 2010
interest paid in the month of may 2010, what will be the treatment .
1 Replies
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 03 June 2010
As Far as I believe, interest on borrowed capital for the purchase of asset can be capitalised only upto the date when the asset is ready for the purpose its bought and not the date of which it is actually used. so if the asset was purchased and was ready for use right after purchase then interest from that date cannot be capitalised. for example
If you borrowed capital of 100000 Rs @ 10% interest to build a warehouse on 1/4/2009 and your building was completed on 1/8/10, and was put to use on 1/4/10. your interest capitalization will not be Rs 10,000(10% of 100000), but only 3333(10000*4/12), that is interest upto 1/8/2010 only(asuming interest is due from the first day itself).
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