Mr.A (proprietor of Crackers Shop) has paid a sum of Rs.1,00,000 for explosive license for 5 years. Whether it is an asset or expense? If it is asset, whether it has to be written off over a period of 5 years.
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Treatment in books of accounts
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I think there can be two options for u:
- Treat it as asset in which case depreciation @ 25% will be applicable on Written down value method
- Treat it as deferred revenue expenditure and charge off the same in 5 yrs.
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