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Querist : Anonymous

Querist : Anonymous (Querist)

10 August 2013 What is the meaning of Imputed cost of Owner's equity?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

11 August 2013 Imputed Cost means notional cost or implied cost. Owner's Equity also have some implied cost. As per AS 16- only explicit costs are considered.
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Suppose I buy a Machine. I pay 6.00 lac from my Bank A/c. I take Loan of 4.00 lac @ 12% p.a.
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You can say that I am incurring an annual imputed cost expenditure of Rs. 72000/-, though I have not to pay anybody.
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Querist : Anonymous

Querist : Anonymous (Querist)

12 August 2013 Thank You Sir,
Sir by your answer can I come to the following conclusion :
If the co purchases fixed assets by raising preference shareholders and if the fixed asset is qualifying asset in the words of AS -16, then the interest paid to preference shareholders for the period till the fixed assets becomes usable should not be capitalized.
Am I correct Sir?
Please do correct me in this regard, if I am wrong.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

12 August 2013 The preference share holders are paid dividend and not interest.
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Dividend distribution is appropriation out of profits.
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So, It is correct if you do not capitalise such amount.
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Querist : Anonymous

Querist : Anonymous (Querist)

14 August 2013 Thank you very much for your answer sir.
It is actually very helpful for me in many ways.
Thank you again.

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