Revenue or capital expenditure

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 September 2012 Hi,
Me wanted to ask that one of my auditee co. has maintained excise books, there they entered some spares as capital goods.But in accounts co. has shown these as spares and considered as revenue expenditure.
In this matter, my question is whether these spares be treated as capital goods in accounts/books of the co.?or there treatment of treating as revenue is correct?

CA Sumat Singhal

CA Sumat Singhal (Expert)
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01 September 2012 AS per AS 10 Stand-by equipment and servicing equipment are normally
capitalised.Machinery spares are usually charged to the profit and loss
statement as and when consumed. However, if such spares can be
used only in connection with an item of fixed asset and their use is
expected to be irregular, it may be appropriate to allocate the total cost
on a systematic basis over a period not exceeding the useful life of the
principal item.”