Hi friends
Can anybody pls tell me whether external Hard disk worth Rs 7500 be capitalised.
If Yes Why should it be capitalised?
If no why shouldn t it be capitalised?
5 Replies
Max Payne
(employed)
(2574 Points)
Replied 08 December 2009
Capitalise an expense for improvement of an asset if it has the effect of
a) increasing capacity/efficiency beyond original capacity/efficiency or both; or
b) Extending the useful life of the asset; or
c) Long term cost reduction in its operation; or
d) necessary to install a fixed asset and use it
Expense it off if it does not fulfil these conditions. You can treat the same as repairs to computers
But being a new asset (I assume since you say external hard disk drive), you would have to capitalise the same at the cost of purchase, less any VAT or other taxes which can be recovered by you.
You may note that Schedule XIV to the Companies act allows an asset to be depreciated fully in the year of purchase only if its value is below Rs. 5000/-. Hence i advise you to capitalise.
Ansari
(ca final)
(444 Points)
Replied 08 December 2009
| Originally posted by :G.K.. | ||
| " |
Capitalise an expense for improvement of an asset if it has the effect of
Agree with G.K. |
" |
Krishnasai
(Articles)
(55 Points)
Replied 10 December 2009
But its an EXTERNAL HDD and not an internal one
Can i still capitalise it?
Max Payne
(employed)
(2574 Points)
Replied 10 December 2009
Yes, i think you can because it provides you a new asset - storage capacity.
Please do look for accounting policies of the organisation in this type of matter.. Its an asset to be capitalised and depreciated in my opinion.
Amol Gopal Kabra (CA,CS,DISA)
(Practicing CA)
(8539 Points)
Replied 10 December 2009
As it is an external HDD, you have to capitalise it at its life extends over a year and also the amount of it is more than Rs.5000. In case it had been an internal hard disk, it cant be capitalised as it doesnot amount to addition in the fixed asset. Its an improvement in fixed asset. So in your case, the external HDD needs to be capitalised.
However, you can take a different veiw if the management intends to use the same for one year only. In such case, it can be charged off to profit and loss account.
Recent Topics
- Reporting in gstr9 of ITC of Previous year reverse
- Tax on Reimbursement of House Rent
- MAHARASHTRA CHARITY COMMISSIONER WEBSITE
- Explanation 3 to section 11(1) read with section 4
- Ammendment in Partnership On Death of Partner and
- TDS Provisions applicability Tax Audit Individual
- NAME CHANGE OF HUF
- Advisory for Reporting TDS Deducted by scrap Deale
- Section 194 J Technical Service/Professional Servi
- Solving of Export Related Problems
Related Threads
CAclubindia
