Treatment of ld chargs in procurement of capital asset

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2013 What should be the accounting treatment for Late Delivery Charges recovered from Supplier of Capital Asset? Should it be deducted from the cost of Asset or Credited to P&L A/c.

CA Simarpreet Singh Gulati

CA Simarpreet Singh Gulati (Expert)
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24 September 2013 A fixed asset cannot be capitalised at an amount higher than that paid/incurred by the company. In this case, late delivery charges are recovered from the supplier i.e. the amount paid to supplier is invoice value of asset less late delivery charge.
Therefore, the amount to be capitalised is asset cost - late delivery charge.

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2013 if the late delivery charges are recovered after capitalization of asset..should the asset be Decapitalize.??