A Motor cycle costing
1) Rs.52,804 was purchased.Additional fitings cost -Rs.3000 (Capitalised both)
2) Road Tax Rs.3500,Number registeration-Rs.1200,Vehicle insurance Rs.3000.
Is it necessary to capitalise items listed as Sl no.2
Jyothis (Article) (1127 Points)
15 March 2016A Motor cycle costing
1) Rs.52,804 was purchased.Additional fitings cost -Rs.3000 (Capitalised both)
2) Road Tax Rs.3500,Number registeration-Rs.1200,Vehicle insurance Rs.3000.
Is it necessary to capitalise items listed as Sl no.2
Amit M Bafna
(74 Points)
Replied 15 March 2016
Yes all should be capitalised as per Accounting standard 10
Ajit Hegde
(CA - Final)
(1367 Points)
Replied 16 March 2016
Saliq Ansari
(CA_Final Student)
(885 Points)
Replied 18 March 2016
As per AS 10, Accounting for Fixed Assets,
An Asset should be recorded in the books at histroical cost
Historical Cost includes, Purchase Price + Non Refundable Taxes + All costs those are directly attributable to bring asset in its present location or condition or its intended use.
Hence all Costs those are directly attributable for bringing the asset for its present location should be capitalised.
The insurance cost if not incurred then also the asset brought to its present location with out any difficulty then the insurance cost should not be capitalised, But if the insurance cost is necessary to bring the asset in its present location then it should be capitalised.
Sargurunathan.G.R.
(stcguru@gmail.com)
(147 Points)
Replied 24 March 2016
Yes , Sl.no 2 also captalised , since expenses related to new asset ,it should capitalised
Harshad Kanekar
(Taxation and Accounts Executive)
(314 Points)
Replied 05 April 2016
Jyotis,
I agree with all the experts that cost which helps to bring the asset to the Present location should be capitalised but Insurance cannot be capitalised as without insurance too you can bring the asset to the Present location.
Hence it should be treated as revenue Expense as suggestted by Ajit Hegde!!
Hope it clearifies your doubt.
Regards.
CAclubindia
