capitalisation

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Sunil Kumar (Querist)
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29 April 2009 what is the procedure of capitalisation . As i am in pharma industry and production is alread started . now we have to capitalise our machinery and all. so what are the steps and guidelines to do that . please help ?

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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29 April 2009 If you have already booked machinary cost to expenses then just change the journal entry i.e.

Dr. Machinary
Cr. Expense a/c

otherwise entry would be

Dr. Machinary
Cr. Bank/Cash a/c

taxindiaconnect

taxindiaconnect (Expert)
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01 May 2009 As per AS - 10 on fixed assets accounting any cost which is incurred to bring the machinery or any capital assets to a working conditions, should form part of the plant and machinery or capital assets. Accordingly the all expenditure whether foundations freight, salaries, travel expenditure labour charges technical fees etc. paid to bring the machine / capital asset in working condition forms part of the plant and machinery / capital asset eligible for deprecation at the rate applicable to plant and machinery as per Companies Act. This applies the Income tax act depreciation as well. So find out all the expenditure incurred connected directly to being the capital assets in to existence / working condition and capitalise the same capital assets. The entries have been well explained by Prakash. Please note that any CENVAT claimed against the plant and machinery needs to be reduced from the cost or any subsidy received should also be reduced from the cost of the asset

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