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Accounting of fixed assets - computer
According to saurabh maheshwari evry new thing shud b capitalized? Bcz it will work better.This is absolutely wrong. How monitor can enhance capacity.Even hard disk has been replaced so that computer will work properly. Both expenses are revenue in nature.
If it is mentioned in question that it increase the capacity then treat it as a capital expenditure otherwise revenue expenditure
It will be revenue expenditure if replaced with same capacity, if with enhanced capcity it will be capital expenditure.
It is an asset more than use 1year that incurred a cost is called capital expenditure
Any subsequent expenditure shall be capitalised only when the original cost is separately identified on initial recognition and was separately depreciated. This is the view of IFRS
If the expenditure is above 5000 it shd be treated as capital else revenue
If HD is of higher capacity then capitalize..subject to materiality..else write it of..
It's a capital expenditure because hard disk is an essential part of the computer without which it can not work. However you may charged monitor against revenue.
It is capital expenditure
revenue expenditure
@ saurabh maheshwari :replacement does nt lead to enhance or improve the capacity of the principal asset BEYOND STANDARD
It is revenue expenditure if doent enhance the efficiency of computer if it enhance the efficiency of computer in that case difference of current market value of old HD and new HD shall br capital expenditure as per AS10
as per your question, the replacement will enhance the performance of the asset, as per AS 10, if replacement would result in enhancement of performance than previously assessed performance then such expenditure would qualify for capitalization, but you should take decision after considering materiality aspect.that is whether the amount of expenditure is such that should be capitalized or can be charged to profit and loss account..
while capitalizing both approaches shall be bourne in mind. .
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