capital ya revenue??

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2011 weather insurance charges charged on motorvehicles at the time of purchase be capitalised,or be charged 2 revenue

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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25 February 2011 May be capitalized.

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2011 may be..:) ??

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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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.

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PINKESH JAIN

PINKESH JAIN (Expert)
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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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