Capitalisation of first insurance charges

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2009 Dear experts,

Kindly let me advise that whether 1st Insurance could be capitalised. If yes, what is the logic behind this since subsequent insurance payment would be charged to Profit & Loss Account?

Thanks & Regards

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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13 November 2009 Cost of a fixed asset should comprise its purchase price and any other costs directly attributable to bringing the asset to its working condition or for its intended use. So 1st insurance can be capitalized and the rest can be classified as revenue expenditure.

Vipul J. Bhavsar

Vipul J. Bhavsar (Expert)
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13 November 2009 All the expenses incurred till the asset is put to use should be capitalised. Accordingly, the first insurance paid is the part of those expenses hence should be capitalised.

Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2009 Agreed!!

Thanks for prompt response.

Regards

Kishan Lal Paliwal

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