Assets Costing less than Rs 5000

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CA Arvind Kumar Sharma (Querist)
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07 May 2009 Hi,

If the Company purchased the assets for less than Rs 5000 than as per notes to Schedule XIV of Companies act that should be depreciated at the rate of 100%. I have two questions in this regard.

1. If the asset is purchased in Nov 2008 and the Company is having its Finacial year end in Dec 2008 so using the rate of Dep of 100% (as stated above)two months depreciation will fall in FY 2008 and rest of 10 months will fall in 2009. Is this interpretation correct??

2. If the 1st is not correct, than should the assets be depreciated entirely during the year of purchase or should it be written off immediately after capitalisation, if the asset is to be written off immediately after capitalisation than what is the purpose of routing this asset from FAR (i.e Fixed Assets Register)so can that be written off straight away as expense to P&L.

Pls note that in case of 2nd the Company will not be following the 100% rate defination as mentiond in Schedule XIV.

Regards,

Arvind

Jitender

Jitender (Expert)
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07 May 2009 it will be written off 100% in the year of purchase & reason for stating in FAR is to have an internal control procedures.

CA Arvind Kumar Sharma

CA Arvind Kumar Sharma (Querist)
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07 May 2009 If that is the interpretation, than why the notes to schedule XIV refer only about rate and not specifically abt depreciating in the year of purchase.

If this to be written off in the year of purchase than should it be immediately after Capitalisation or should be evenly spread over the balance part of the year

Randeep Singh

Randeep Singh (Expert)
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10 May 2009 Dear,
Your first interpretation is right, actually rate is 100%p.a. i.e. 100% but in proportion to months in which asset put to use.

CA Arvind Kumar Sharma

CA Arvind Kumar Sharma (Querist)
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19 May 2009 Request for few more details opinion.

Thanks in advance...

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