it shud be capitalised..!!!
Purchase of car against additional warranty charges
Page no : 3
CMA. Rakesh Kataria
(Practising Cost Accountant)
(536 Points)
Replied 25 May 2011
Additional warranty charges is nature of expenses for repairs and maintenance of the machinery which we are paying in advance at time of purchasing the machinery.
So we should book it as pre-paid expenses
Anshu Garg
(working)
(139 Points)
Replied 25 May 2011
ACC. to me , it should be capitalised bcoz these expenses made at the time of purchase .
*RENU SINGH *
(✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ )
(21627 Points)
Replied 25 May 2011
As according to me its an revenue expenditure as because its not increasing the capacity beyond the stipulated period.
So it cant be capitalise.
or else let the experts reply ...
Hari
(Chartered Accountant)
(159 Points)
Replied 26 May 2011
whatever amount incurred before the asset put to use must be capitalized.
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 26 May 2011
additional warrantee is purchased alongwith the car purchase , and its like other expenses viz, registration, RTO fees, insurance ( 1st time), so it should be capitalized in 1st time, as per bill of dealer
from next renewal it would go in P/L, under head under repair and maintance or vehicle maintanance.
G!rdhar! Jang!d
(Tax Consultants )
(680 Points)
Replied 28 May 2011
| Originally posted by : A.Jayasri | ||
 |
At the time of purchasing an asset , whatever you incur the expenditure it should be capitalized to the asset. |
 |
BABU
(ARTICLED ASSISTANT)
(25 Points)
Replied 28 May 2011
Dear Manik,
I would like to remind you the AS10 on Accounting of Fixed Assets. It says "Bringing the assets into working condition" and Directly attributable cost". Cost of warranty does not match both the concept in my view.
Capitalising a payment just because it is paid at the time of purchase is not right according to me.
So, Booking the cost paid for warranty in prepaid expenses and transferring to the expenditure every year in an equal proportion (Amount paid / No of years of extended warranty) till the warranty period expires may be the correct treatment.
STILL SEEKING ADVISE ON MY COMMENT...
deepika
(deepika)
(25 Points)
Replied 01 June 2011
it should be capitalised because this exp. incurred at a time of purchases
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