Defered revenue expenditure
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 June 2012
Hi
We purchase spares for machinery which have a life of more than a year say 2 or 3. The cost is very high. So we are planning to write off the cost of spare over a period of 2 or 3 years. Note the same is not a inventory as the same is put to use immediately.
Whether such accounting policy is proper? Is there any risk implication?
Kindly suggest your view in this regard.
Rgds
VS
We purchase spares for machinery which have a life of more than a year say 2 or 3. The cost is very high. So we are planning to write off the cost of spare over a period of 2 or 3 years. Note the same is not a inventory as the same is put to use immediately.
Whether such accounting policy is proper? Is there any risk implication?
Kindly suggest your view in this regard.
Rgds
VS
04 June 2012
Stores that are of capital in nature are to be capitalised and depreciated as plant & machinery.
Excerpt from ASI 2 - Accounting for Machinery Spares
4. Machinery spares of the nature of capital spares/insurance spares should be capitalised separately at the time of their purchase whether procured at the time of purchase of the fixed asset concerned or subsequently. The total cost of such capital spares/insurance spares should be allocated on a systematic basis over a period not exceeding the useful life of the principal item, i.e., the fixed asset to which they relate.
Excerpt from ASI 2 - Accounting for Machinery Spares
4. Machinery spares of the nature of capital spares/insurance spares should be capitalised separately at the time of their purchase whether procured at the time of purchase of the fixed asset concerned or subsequently. The total cost of such capital spares/insurance spares should be allocated on a systematic basis over a period not exceeding the useful life of the principal item, i.e., the fixed asset to which they relate.
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- EPF ECR NEW FILE SEP 17TH 2026
- Capital Gail Exemption Certificate
- Oct 2025 Invoices
- SECTION 393(3) TAX ON CASH WITHDRAWAL
- Clarification Requested: Gift → NRO → NRE → Overseas Transfer - USA/CANDA (FEMA & Tax Compliance)
- Capitalgain tax purposes for valuation report compulsory
- TAX AUDIT ON PROFESSIONAL INCOME
- TDS on Fixed Assets purchased
- Under marginal scheme
- Import of Software Service.
- Depreciation Chart Companies Act
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
