Capitalization
This query is : Resolved
03 July 2013
what is capitalization,how it is done.
03 July 2013
Capitalization is based on the concept of materiality. If a cost is too small, it is charged to expense at once, rather than bothering with a series of accounting calculations and journal entries to capitalize it and then gradually charge it to expense over time.
04 July 2013
In addition to the comments given by Sanjay as above, the thumb rule to consider the expenses for capitalization is an analysis of the expenses to determine:
1. the expenses incurred will increase the useful life of asset, value addition of product produced by such asset, increase in the productivity etc.
if the answer is "YES" you may opt to capitalize such expenses.
1. the expenses incurred will increase the useful life of asset, value addition of product produced by such asset, increase in the productivity etc.
if the answer is "YES" you may opt to capitalize such expenses.
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