Capital and revenue expenditure
This query is : Resolved
12 December 2017
An asset is manufactured at a cost of rs 200000 on 1st October for which loan of rs 150000 was taken on 1st April of that year at 10% p.a.The entire loan was outstanding till the end of the financial year. Which of the following is correct?
A. Capital expenditure Rs 200000 and revenue expenditure rs 15000
B.Capital Expenditure Rs 207500 and Revenue Expenditure Rs 7500.
C. Capital expenditure Rs 215000
D.None of the above.
Please answer with proper explanation.
A. Capital expenditure Rs 200000 and revenue expenditure rs 15000
B.Capital Expenditure Rs 207500 and Revenue Expenditure Rs 7500.
C. Capital expenditure Rs 215000
D.None of the above.
Please answer with proper explanation.
13 December 2017
You have not mentioned whether the asset was put to use after the manufacturing of asset. If the expenses is incurred before the asset is put to use, option C is applicable as per AS - 16 Borrowing Cost. Else option A will be applicable if the asset is already put to use.
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