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Capitalisation of expense

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Can we capitalize repair and maintainance expenses incurred on company owned building?? Explain with accounting entry
Replies (9)

Repair and maintainance expenses can be captalised only if the expense results into increase in useful life of the asset or results into extension or enhanncement of asset.

If the expense has been incurred only to restore the asset in its original form, it cannot be capitalised and should be charged to revenue.

that repair and measurement will be treated as an asset and be entered into measurement book , usually buiilding wiring , fans switches etc go into measurement book,

 

asset ac/ dr

bank ac cr

 

but if hte work is very less amt like 2000 - 3000 rs we dont capitalize it, depends on our budget and org policy we capitalize repairs & maintenance works .

You will really have to clasify whether that expenditure is capital in nature or revenue in nature.

To justify that it is capital in nature you will have to see if the following attributes are present.

a) You are the owner of the asset

b) The expenditure will yield some benefits for more than 1 year

c) It increases the capacity of the asset.

In case any of the above attribute is not applicable, then you cannot capitalise. Otherwise you can take it as expenditure

Originally posted by : Ashish Ranjan

Repair and maintainance expenses can be captalised only if the expense results into increase in useful life of the asset or results into extension or enhanncement of asset.

If the expense has been incurred only to restore the asset in its original form, it cannot be capitalised and should be charged to revenue.

Perfectly clarified..

Originally posted by : Ravishankar K

that repair and measurement will be treated as an asset and be entered into measurement book , usually buiilding wiring , fans switches etc go into measurement book,

 

asset ac/ dr

bank ac cr

 

but if hte work is very less amt like 2000 - 3000 rs we dont capitalize it, depends on our budget and org policy we capitalize repairs & maintenance works .

Fully Agreed.

Originally posted by : Ashish Ranjan

Repair and maintainance expenses can be captalised only if the expense results into increase in useful life of the asset or results into extension or enhanncement of asset.

If the expense has been incurred only to restore the asset in its original form, it cannot be capitalised and should be charged to revenue.

It is the perfect answer.............................

 

JOURNAL ENTRY is...........

For capitalize the Expenses

          Assets A/c       Dr.

                To Bank A/c

             

For other......

Repair A/c          Dr.

       To Bank A/c

Originally posted by : praveen

You will really have to clasify whether that expenditure is capital in nature or revenue in nature.

To justify that it is capital in nature you will have to see if the following attributes are present.

a) You are the owner of the asset

b) The expenditure will yield some benefits for more than 1 year

c) It increases the capacity of the asset.

In case any of the above attribute is not applicable, then you cannot capitalise. Otherwise you can take it as expenditure

AGREED.

I am more aggreable to the view that repairs and maintenance expenses should be treated as revenue item and not capitalised if they are purely for keeping the building in proper and usable condition.  I am attaching a link on some videos for CPT, for your kind feedback.  https://www.youtube.com/user/jbsclasses

Some like Daya to day maintenance is expenses and some repairs like restoration or upgradation can be capitalised. 


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