Please Wait ..

Sign-in to your account


Username:
Password:

Remember Me

Forgot your password?

Sign-up now



Join CAclubindia.com and Share your Knowledge. Registered members get a chance to interact at Forum, Ask Query, Comment etc.


Discussion > Audit > Stat Audit >

Fixed Assets; Capital or Revenue

    Post New Topic
Pages : 1 2





CA, DISA

[ Scorecard : 5315]
Posted On 15 October 2008 at 09:46 Report Abuse

 

I have certain queries in connection with capitalization of assets as Fixed Assets. These may be of great help to anyone in its profession. We can discuss these. We can have a discussion on anyone of these:-
 
1.      First Insurance on purchase of a new car. Whether to be capitalized?
2.      Software; Whether to be capitalized as Compter?
3.      What will be the rate of depreciation on software?
4.      Software like the one TDS Software; Whether to be capitalized?
5.      Fire Extinguishers; Whether may be written off @ 100%?
6.      A complete asset costing Rs.15000 when purchased in parts(components) and assembled and house costs Rs.12000/- with none of the component costing in excess of Rs 5000. Whether the whole of the asset may be w.off as the individual cost of all components is less than Rs.5000/-?
7.      Software developed in house. How the same should be capitalized? What will be the cost of such a software? How the auditor will verify its cost for the purpose of his Audit under the Companies Act and 44AB of Income Tax Act?
8.      Fee paid for seeking extension of the construction time to a Development Authority by a plot owner before the construction date. Whether to be capitalized?

                   9.   A Company has acquired 20 plastic Moulded chairs for Rs. 8000/- i.e., Rs 400 per chair. Whether all the chairs may be w.off

                         in view of the provisions that the asset upto a cost of Rs 5000 may be w.off @ 100%?                


Online classes for CA CS CMA



S.Srinivasaraghavan
Chief Financial Officer and Co

[ Scorecard : 11273]
Posted On 15 October 2008 at 13:26

1.      First Insurance on purchase of a new car. Whether to be capitalized?
Ans: Yes, because, it is incidental to make it worthy of plying only if the insurance is taken.
2.      Software; Whether to be capitalized as Compter?
Ans: It depends upon the useful life span of the software.
3.      What will be the rate of depreciation on software?
Ans: Amortised over its useful life span.
4.      Software like the one TDS Software; Whether to be capitalized?
5.      Fire Extinguishers; Whether may be written off @ 100%?
Ans: I suppose you are referring to the wall hanging ones.Yes, as they become spent on their opening and as we do not know when they will be opened.
6.      A complete asset costing Rs.15000 when purchased in parts(components) and assembled and house costs Rs.12000/- with none of the component costing in excess of Rs 5000. Whether the whole of the asset may be w.off as the individual cost of all components is less than Rs.5000/-?
Ans: The asset comes to existence only on assembly. The answer is therefore obvious.
7.      Software developed in house. How the same should be capitalized? What will be the cost of such a software? How the auditor will verify its cost for the purpose of his Audit under the Companies Act and 44AB of Income Tax Act?
Ans: It is possible to capitalise based on the job card details.
8.      Fee paid for seeking extension of the construction time to a Development Authority by a plot owner before the construction date. Whether to be capitalized?
Ans: No, as this is an extraordinary one.

                   9.   A Company has acquired 20 plastic Moulded chairs for Rs. 8000/- i.e., Rs 400 per chair. Whether all the chairs may be w.off in view of the provisions that the asset upto a cost of Rs 5000 may be w.off @ 100%? 

Ans: Yes.               



Total thanks : 1 times




CA Annie
Chartered Accountant

[ Scorecard : 742]
Posted On 15 October 2008 at 13:44

As per iAS 16: The cost of an item of plant and equipment comprises:

(a)     its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.

(b)     any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

(c)     the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

Hence First Insurance paid on car may not be capitalised. In case of a business of running car it may be capitalised.




Pankaj Khator
Service

[ Scorecard : 10]
Posted On 17 October 2008 at 10:04

1.      First Insurance on purchase of a new car. Whether to be capitalized?
Ans. No, it will be charged to the expenses account as it is not the primary expenses part of the new car and after one year it will be expired, hence in my opinion it shpuld nopt be captalised.
 
2.      Software; Whether to be capitalized as Compter?
Ans. Yes, it should be capitalised, as withouit software the computer will loose its identity and could not be used for work.
 
3.      What will be the rate of depreciation on software?
Ans. The software should be amortised over the period of its licence validity.
 
4.      Software like the one TDS Software; Whether to be capitalized?
Ans. No, it need not to be, but if we purchase software once and it requires only updation in the existing software, then we can capitalised it and updated charges should be charged to expenses account.
 
5.      Fire Extinguishers; Whether may be written off @ 100%?
Ans. It dependes on its value and its useful life. if the useful life will over within one year and could not be used by refilling it or the value is less then 5000/- then we can write off it @ 100/% else it should be capitalised and charge depreciation at the applicable rates.
 
6.      A complete asset costing Rs.15000 when purchased in parts(components) and assembled and house costs Rs.12000/- with none of the component costing in excess of Rs 5000. Whether the whole of the asset may be w.off as the individual cost of all components is less than Rs.5000/-?
Ans. No, as asset came into existence only after assembeling the different parts. When different parts below value of Rs.5000/- assembeled and generate new asset then the value of new generated asset will be the total cumulative cost of every part used for its. Hence it should not be writeoff @ 100%.
 
7.      Software developed in house. How the same should be capitalized? What will be the cost of such a software? How the auditor will verify its cost for the purpose of his Audit under the Companies Act and 44AB of Income Tax Act?
Ans. The cost manpower, materials and components involved in developement of the software, will be the cost of the software and the Assignment in payroll or Job Card or in any internal reports will be the support the cost.
 
8.      Fee paid for seeking extension of the construction time to a Development Authority by a plot owner before the construction date. Whether to be capitalized?
Ans. Yes it needs to be capitalised because without it the civil structure could be come in existence.
 
9.      A Company has acquired 20 plastic Moulded chairs for Rs. 8000/- i.e., Rs 400 per chair. Whether all the chairs may be w.off
Ans. Yes, it can be writeoff @ 100%

                         

                         in view of the provisions that the asset upto a cost of Rs 5000 may be w.off @ 100%?                




Pankaj Khator
Service

[ Scorecard : 22]
Posted On 17 October 2008 at 10:05

      First Insurance on purchase of a new car. Whether to be capitalized?

Ans. No, it will be charged to the expenses account as it is not the primary expenses part of the new car and after one year it will be expired, hence in my opinion it shpuld nopt be captalised.
 
2.      Software; Whether to be capitalized as Compter?
Ans. Yes, it should be capitalised, as withouit software the computer will loose its identity and could not be used for work.
 
3.      What will be the rate of depreciation on software?
Ans. The software should be amortised over the period of its licence validity.
 
4.      Software like the one TDS Software; Whether to be capitalized?
Ans. No, it need not to be, but if we purchase software once and it requires only updation in the existing software, then we can capitalised it and updated charges should be charged to expenses account.
 
5.      Fire Extinguishers; Whether may be written off @ 100%?
Ans. It dependes on its value and its useful life. if the useful life will over within one year and could not be used by refilling it or the value is less then 5000/- then we can write off it @ 100/% else it should be capitalised and charge depreciation at the applicable rates.
 
6.      A complete asset costing Rs.15000 when purchased in parts(components) and assembled and house costs Rs.12000/- with none of the component costing in excess of Rs 5000. Whether the whole of the asset may be w.off as the individual cost of all components is less than Rs.5000/-?
Ans. No, as asset came into existence only after assembeling the different parts. When different parts below value of Rs.5000/- assembeled and generate new asset then the value of new generated asset will be the total cumulative cost of every part used for its. Hence it should not be writeoff @ 100%.
 
7.      Software developed in house. How the same should be capitalized? What will be the cost of such a software? How the auditor will verify its cost for the purpose of his Audit under the Companies Act and 44AB of Income Tax Act?
Ans. The cost manpower, materials and components involved in developement of the software, will be the cost of the software and the Assignment in payroll or Job Card or in any internal reports will be the support the cost.
 
8.      Fee paid for seeking extension of the construction time to a Development Authority by a plot owner before the construction date. Whether to be capitalized?
Ans. Yes it needs to be capitalised because without it the civil structure could be come in existence.
 
9.      A Company has acquired 20 plastic Moulded chairs for Rs. 8000/- i.e., Rs 400 per chair. Whether all the chairs may be w.off
Ans. Yes, it can be writeoff @ 100%

                         

                         in view of the provisions that the asset upto a cost of Rs 5000 may be w.off @ 100%?                




nitin
C.A. Final 2nd group

[ Scorecard : 58]
Posted On 06 June 2011 at 22:36

i am also having some problems in capitalisation and in revenue part...

as per AS 10 if a part of asets is replaced it should be capitalised seperately when that part can be used seperately after the discarding of the main asset...

from this statement I got totally confused ...

that i read from ICAI c.a. final module that if aeroplane engine is replaced than it should be sepeartely capitalised because it can be used seperately after the aeroplane is discarded.

how this is possible....I am not satisfied ....

and from this sentence a lot of cross questions in my mind arisen...

that the tyres of car replaced can be seperately capitalised because it can be used in other cars if the original car is discarded....i think these are funny questions but i am having a very very vast confusion regarding this....

i have also many cross examples ......but i want to know how should I overcome from these confusions related to AS 10...

replies are welcomed...

 

 

 




nitin
C.A. Final 2nd group

[ Scorecard : 58]
Posted On 06 June 2011 at 22:39

A company purchased an accounting software TALLY ERP ....I had capitalised that exp. but want to know at what rate it will be depreciated as per companies act...i know as per income tax act it will be depreciated at 60%......

replies are welcomed...

thanks..




CA ADITYA SHARMA
CA IN PRACTICE

[ Scorecard : 16653]
Posted On 07 June 2011 at 07:21

nitin 60% rate will be charged



PALANIAPPAN
CHARTERED ACCOUNTANT

[ Scorecard : 33]
Posted On 16 June 2011 at 18:50

A software developing company purchased software for developing software to their customers. Whether thes expenditure is revenue or capital. If we treat as Non tangible asset, what will be the deprecaition rate?

 

PALANIAPPAN




Bhushan Gumgaonkar
. ...

[ Scorecard : 52]
Posted On 24 October 2011 at 12:28

I purchase Tally software of Rs 38500/- for company.

How we treat in Accounts?

1. Capital/ Revenue

2. If Revenue-

i) Accounts head

ii) Deffered revenue Exp.- over is Licence period

3. If Capitalised

i )Dep. rate in Income Tax/ ROC?

ii) Block name (Computer/Office Equipment)

4.  Bases for the acounting



There are 10 Replies to this message








Related Files








Related Threads


Post your reply for Fixed Assets; Capital or Revenue



Your are not logged in . Please login to post replies

Click here to login


Not a member yet ?? Click here to signup

Message







    

  • Use thank button to convey your appreciation.
  • Maintain professionalism while posting and replying to topics.
  • Try to add value with your each post.



Forum Home | Forum Portal | Member Control Center | Who is Where | Popular Threads | Today's Topic | Recent Posts | Today's Posts | Post New Topic | Thread With Files | Top Threads This Month | Forum Stats | Unreplied Threads

back to the top