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P & L

CA Himanshu Khurana (Chartered Accountant) (813 Points)

05 June 2009

if revenue exp. is treated as a capital exp. in short run profit of the current year is overstead but in long run it is charge P & l by way of depreciation . No effect on business profit

Is True or False.

if true , why

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5 Replies

Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 05 June 2009

It is true in some cases only .

If tou write off the entire amount of expenditure to P/L in subsequent year(as in case of depreciation ) then it is true.

For example assets repaired (reveuue expenditure) Rs. 5000 added to cost of assets treating ait capital exenditure. In subsequent yera if you transfer the amount as depreciation the ultimate effect will be NIl . But if the assets is sold suring the period or some capital exp. not charged to P/l then the statement will noit hold good.

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triumph-CMA (Chartered Accountant) (503 Points)
Replied 05 June 2009

manmohan is right.

RAMANJU (here to updating the knowledge) (485 Points)
Replied 05 June 2009

There will not be any effect on business profit as a whole and no. of accounting year taken together. Otherwise there will be effect on business profit as the profit is overstated over a no. of accounting years.

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 10 June 2009

Manmohan is right.

It will definately impact the profit for the current year and for future years also as depreciation will be provided for a no. of years and till then the profit will be overstated.

PiyushAgrawal (Chartered acooutant in practice) (575 Points)
Replied 11 June 2009

Originally posted by :himanshu
"	if revenue exp. is treated as a capital exp. in short run profit of the current year is overstead but in long run it is charge P & l by way of depreciation . No effect on business profit Is True or False. if true , why	"