Capitalization of tooling with machinery
Querist : Anonymous
we have purchase machinery to make one product. machine is not product specific , making of product depend upon the tool & die.
query is , whether the tool installed on machinery is capitalized with machine or capitalized separately.
Please elaborate..
However, if such tools can be used as the integral part of the machinery then it should be capitalized to machinery account..
Or the Tools can be used even after machinery is been disposed off then its better to capitalized it separately...
Querist : Anonymous
Thanks for your reply
We have 3 to 4 similar machines we can use the same tool in any of machine for production purpose.
tools is not integral part of machine but it can not be used without machine.
Querist : Anonymous
We are facing problem in charging depreciation
If we capitalize with machinery then rate at which we charge dep on machinery is charged on tools also.
but in actual life of tool is 2 to 3 yrs & dep will go till 20 yrs.
?????
Querist : Anonymous
then how can we charge it in current year itself
Querist : Anonymous
Agreed from ur point of view but my query is not for old machinery , we are talking at the time when we purchase new machine & for production purpose we need some tools which is fixed in machine for production.
life of machine is 10 yrs & tools is 2 to 3 yrs.
query is , tools purchased first time with machinery is capitalized with machine or separately.
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