Accountancy help

Hi,

While calculating FMP some books have taken the profit for the year since the data is given, while in some books the y have ignored the first years profit stating that we cant compare those profits from the earlier years and average has been taken accordingly.    Can anyone let me know which one is correct??

TIA

Read more at: /forum/g-w-valuation-query-252524.asp

OMG! So many people are answering wrong.

The first problem clearly states, from how much amount you gonna debit the Fixed Asset a/c . Obviously with the amount which is required to be paid for getting the Asset in usable condition, i.e., 5,60,000 + 25,000 = 5,85,000. Now, insurance is clearly a revenue expense you are not going to depreciate insurance charges, I really hope so.

In the second problem its 14th August.

Those who are unable to answer, kindly go and take CPT once again.

Originally posted by : Dhruvi N suthar
	Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession. It means its capital in nature at the time of purchase of new assets. All the Expenses incurred before the assets is put to use are capitalised & depreciation will be provided on the same & if you are in Insurance business than it will be treated as revenue expense.

Reply to the highlighted text -

There is no rule that all expenses before assets are put to use are capitalised. It depends on the nature of expenses being incurred. 

It can be 585000 or 595000 as there is no hard and fast rule for capitalisation of  first Insurance charges paid. Its depend on the discretion of the company.

The due date for bill is 16 th august 

Kanika, Due date of bill is 14th August. 

1.The cost of Car should be Rs.585000/- as insurance and petrol are revenue expenses.

2. In case of Bills three days of grace are added to get the 'Due Date'.  But if due date falls on a public holiday, then it is shifted one day before.  In this case it should be 14th August.

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