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Srinath (Querist)

06 March 2011 QUESTION 1

A newly set up Private Company has incurred the following expenditure during construction period..Please classify as Capital or Revenue:

Sundry Expenses such as stationery , Printing, postage, telephone & local conveyance.

ANSWER IN one Book
They constitute an expenditure indirectly which is indirectly related to construction & HENCE capitalized..

IS THIS CORRECT??

QUESTION 2

A minor fire occurred to a machinery cost of repairing is 5000/- estimated.
But company instead used new technology to replace burnt part with new part which will increase efficiency..total cost 50000/-

I feel only 45000(50000-5000) should be capitalized.

Please assist.

Thank you

K R Srinath

Abhishek

Abhishek (Expert)

06 April 2011 1) indirect expenses in construction are revenue in nature and cannot be capitalised

2) WDV attributeable to old part should be written off and new part should be capitalised in full

Message likes : 1 times

Srinath

Srinath (Querist)

07 April 2011 If Possible please Answer this question on Partnership Accounts IPCC
https://www.caclubindia.com/experts/ipcc-partnership-637125.asp

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