25 February 2011
If the motor vehicle is not intended for sale, and used for the purpose of providing services, it can be treated as a fixed asset. If it is treated as a fixed asset, the cost of the same will comprise of its purchase price and any other costs directly attributable to bringing the asset to its working condition for its intended use. Unless the insurance is paid, motor vehicles can't be plied meaning thereby its intended use can't be fulfilled. So insurance charges is a directly attributable cost which should be capitalized. For more accounting details see Accounting standards-10.
N.B:- 'may' is used in a polite way of expressing my observation.
25 February 2011
It should be revenue. Since the insurance premium is for a single year and is not giving value beyond a particular period, it should be charged off to the P&L. because even after taking a insurance the vehicle can not be used for intended purpose beyond the insurance period, for that insurance needs to be renewed. so it should be charged off every year.
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