Whether any item purchased below Rs.5,000 then it is to be treated as a revenue expenses ? means considered in expenses head?
One of our client is not agree to capitalized those item which is below Rs.5,000 & They said as per companies act. if any item purchased below Rs.5,000 is to be treated as a revenue expenses i.e. considered in expenses head.
They are also written of fixed assets which is opening W.D.V. below Rs.5,000.
Whether this accounting effect is right or not as per companies act.& also tell me what companies act. said about this type of transactions.
29 June 2008
There is no such requirement tat expenditure below 5000 should be capitalised.
The amount of 5000 is for this section under companies act
[Provided that any item under which the expenses exceed one per cent of the total revenue of the company or Rs. 5,000 whichever is higher shall be shown as a separate and distinct item against an appropriate account head in the Profit and Loss Account and shall not be combined with any other item to be shown Under "Miscellaneous expenses".]
29 June 2008
"...deprecition on assets, whose actual cost does not exceed five thousand rupees, shall be provided at the rate of hundred percent"
(Source: Note-8 to Schedule XIV for Rates of Deprecition under Companies Act printed at Pages 67 to 72 of 29th edition of Singhania's Direct Taxes Ready Reckoner)
30 June 2008
If Refrigeraor purchased for Rs. 6000 in 2006-07 and dep. provided @ 13.91% for that F/Y . Whether in F/Y 2007-2008 it sud be entirely written off of dep. will be charged @ the prescribed rate?
30 June 2008
...deprecition on assets, whose actual cost does not exceed five thousand rupees, shall be provided at the rate of hundred percent"
(Source: Note-8 to Schedule XIV for Rates of Deprecition under Companies Act printed at Pages 67 to 72 of 29th edition of Singhania's Direct Taxes Ready Reckoner)
i.e., it should be first capitalised and then it should be depreciated 100%. and the expenses should come under the head depreciation and not any other head.
Further WDV whose value is less than or equal to 5000 cannot be charged off fully unless it is impaired or disposed off.
Should you have any further query in this regard let me know.
01 July 2008
"...deprecition on assets, whose actual cost does not exceed five thousand rupees, shall be provided at the rate of hundred percent"
(Source: Note-8 to Schedule XIV for Rates of Deprecition under Companies Act printed at Pages 67 to 72 of 29th edition of Singhania's Direct Taxes Ready Reckoner)
19 July 2008
I too hold the same opinion as expressed by Sri Amit Bazaz who felt "Further WDV whose value is less than or equal to 5000 cannot be charged off fully unless it is impaired or disposed off."
19 July 2008
Sri Amit Bazaz expressed "Further WDV whose value is less than or equal to 5000 cannot be charged off fully unless it is impaired or disposed off."
I too hold the same opinion as expressed above by Sri Amit Bazaz
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