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Accounts

Parmod Rawat (B.COM,MBA,CWA Inter) (401 Points)

29 August 2011

Can anyone please tell me where is the posting of Machinery repair expense whether i have to put in Manufacturing exp in trading account or i need to take in profit & loss account & what is the logic behind that if i take Machinery repair expnese in trading account under Manufacturing expense.

waiting your reply....

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10 Replies

valji (Accounts manager-MBA) (2150 Points)
Replied 29 August 2011

manufacuring expeses haed under tarding accounts in profit & loss accounts before gross profit it is a direct expenses realated to production

1 Like

C.A. Sandeep Wawhal (Chartered Accountant PGDFM BCom.) (1823 Points)
Replied 29 August 2011

Machinery repair expenses should be come under Repairs & maintainance which will reflect under indirect expenses because repairs for machinery is expense towards maintanance of adequet working condition of machinery and also irregular, so it does not releted to production purpose directly and hence it is indirect nature.

1 Like

AMANJOT SINGH ( ipcc+helping hands for friends to the best of my knowledge) (53 Points)
Replied 29 August 2011

sandeep is right it should be treated like this

1 Like

Karan Teli (Life Is just an Illusion...!!) (4573 Points)
Replied 29 August 2011

First check the purpose of machinery and see where is it utlised..

if it is used in manufacturin of goods then treat it as direct expenses and if it is used for packing purpose and all then treat it as indirect one..

If it is indirect you can include in the head of repairs and maintianence.. ( basically the head od acount is irrelevant)

the bases is for what purpose are they used and in what form are they integral to the machinery....

1 Like

TARUN GOYAL (Ca Final Student) (38 Points)
Replied 29 August 2011

karan is right........

1 Like

Amit Gupta (Loosening Myself) (1508 Points)
Replied 29 August 2011

Originally posted by : $ SANDEEP $
	Machinery repair expenses should be come under Repairs & maintainance which will reflect under indirect expenses because repairs for machinery is expense towards maintanance of adequet working condition of machinery and also irregular, so it does not releted to production purpose directly and hence it is indirect nature.

Repairs can NEVER hav direct relation with the ouput.Thus being indirct it should be classified under Repair and maintainance(P/L)

1 Like

sangmesh (CA Final Year Student) (56 Points)
Replied 29 August 2011

All expenses inrelation to production should be treated as direct expenses i.e. manufacuring expenses.So Repairs & Maintenance of Machinery is also a direct expense in relation to production, if it is not done it affectes the production or may be not possible to futher proceed for production.irrelevant of it is regualr or not, it will not affect the relationship between direct or indirect expense.

Further it is clarrified that if the repairs and maintence is major / huge which increases the production capacity of the machine then it should be capitalised instead of debiting to trading account.

It is further to be classified that ,if repairs and maintenance is related to cleaning ,pest control or washing etc then only it is treated as indirect and debit to P& L account.only

Hope u will get ur ans.

thanks

1 Like

Karan Teli (Life Is just an Illusion...!!) (4573 Points)
Replied 30 August 2011

chalo another explanation from cost accouting view...

Repairs to machinery are part of direct expenses since they are going to be linked to production...

they, thus form part of prime cost and hence when we compare it to accounts too it is direct exp.

( i know this is not part of accounts since this article is posted in accounts but it is just an attempt to be much clear since integration and non integration accounting is also a part of subject and act as link between costing and accounts)

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 30 August 2011

Originally posted by : Parmod Rawat
	Can anyone please tell me where is the posting of Machinery repair expense whether i have to put in Manufacturing exp in trading account or i need to take in profit & loss account & what is the logic behind that if i take Machinery repair expnese in trading account under Manufacturing expense. waiting your reply....

if nature of machinery repaired is used for production line, then its direct expenses, but if the repair is done for office works machines/ airconditioner/ car , then its indirect expenditure