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New tyre installed in truck is capital expenditure

Atharv Sankliya (1323 Points)

09 June 2022

new tyre installed in truck is capital expenditure ? and what is the treatment of old tyre if sold as scrap

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CA. ANKIT PANDYA (CA) (682 Points)
Replied 10 June 2022

It should be charged off to P&L as regular maintenance of Truck.

Tyre does not seem to be significant (high value) component of Truck in term of Value in order to fall under component accounting and capitalizing it separately from Truck..

Also, need to check below aspects.

What is the truck used for?

Whether you have capitalized the said truck & tyres separately in your books at the time of Purchase?

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Atharv Sankliya (1323 Points)
Replied 10 June 2022

Truck used in delivering the material
truck is of 40 lac and when truck is purchased tyre is pre installed in it no seperate account is prepared

CA. ANKIT PANDYA (CA) (682 Points)
Replied 11 June 2022

So its is part of regular repair & maintenance activity and needs to be charged off.

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Atharv Sankliya (1323 Points)
Replied 11 June 2022

Ok mean if it was purchased separately and then we buy new tyre is capital expenditure ?

CA. ANKIT PANDYA (CA) (682 Points)
Replied 11 June 2022

No, As explained in earlier reply, for separate accounting, a component needs to be of significant value in proportion of the main asset, which is not so in case of Tyre as it is low value and it will be replaced regularly throughout the life of truck.

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CA Puja Sharma (Chartered Accountant) (4969 Points)
Replied 11 June 2022

Treat as revenue expenditure and charge to P/L A/c.

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