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Accunts doubt

harish ragav (student-IPCC) (407 Points)

06 December 2012

cost of shifting of business to a more convenient locality is

a)capital exp

b)rev exp

c)deffered revenue exp

d)capital loss....

ans pls and explain how pls

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14 Replies

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 06 December 2012

Answer would be capital expenditure.

Reasion :

First of all we have to know meaining of Capital expenditure.

Its features like, for long term purposes, getting benefit for more than 3 years , For generating Revenue, one time invest etc...

Shifting of business in more convienent locality includes above all features.. If New area having good traspotation facility that may save production expenditure. This is one of the examaple..

Think on it..& May you understand better!

2 Like

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 06 December 2012

AGREE WITH ABOVE

2 Like

harish ragav (student-IPCC) (407 Points)
Replied 06 December 2012

but i had attented the assessment test by icai in it i opt for capital exp but the ans it shows deff rev exp...so ly am confused.....

raunak (CA) (369 Points)
Replied 06 December 2012

capital expenditure....see a similar query and a reply by an expert./experts/capital-expenditure-incurred-on-transfer-of-asset-292060.asp

2 Like

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 06 December 2012

@ harish

It can be possible becoz in capital expenditure and defffered revenue slite different between both.. As per explanation it matched also with deffered revenue.

1 Like

CA Suryakant Dubey (CA ) (931 Points)
Replied 06 December 2012

Capital Expenditure....Bcoz its benefit endures for a longer period......

1 Like

Akanksha Jain (Article) (690 Points)
Replied 06 December 2012

It will be a deferred revenue expenditure as deferred revenue exp. are those for which payment has been made or a liability has been incurred on the presumption that it will be of benefit over a subsequent period or periods.

Also, capital expenditure are subject to depreciation and in the above case depreciation is not chargeable on the cost of shifting the business..

However, am not 100% sure.

1 Like

Akanksha Jain (Article) (690 Points)
Replied 06 December 2012

Also shifting of business will not provide any capital asset so it cannot be a capital expenditure..

1 Like

Pulkesh Mehta (Chartered Accountant) (243 Points)
Replied 06 December 2012

This expenditure cannot be called as Capital Exp. as there is no emergence of Capital Asset by this transaction.

Deferred Revenue Exp. is those exp. which is to be charged against Revenue to be earned in upcoming years in ratio of revenue of respective years.As exp. incurred on shifting of Business to a convenient locality is exp. whose benefit will get accrued in upcoming years,therefore assessment test of ICAI is correct in this regard.

Hoping,above explanation will clear your doubt.

1 Like

C.A SUVAJIT SAHU (CA ( In Practice )) (708 Points)
Replied 06 December 2012

Originally posted by : Pulkesh Mehta
	This expenditure cannot be called as Capital Exp. as there is no emergence of Capital Asset by this transaction. Deferred Revenue Exp. is those exp. which is to be charged against Revenue to be earned in upcoming years in ratio of revenue of respective years.As exp. incurred on shifting of Business to a convenient locality is exp. whose benefit will get accrued in upcoming years,therefore assessment test of ICAI is correct in this regard. Hoping,above explanation will clear your doubt.

Agree with pulkesh...............................

SAGAR (ARTICLED ASSISTANCE) (236 Points)
Replied 07 December 2012

Akaksha ur right

Shifting of business will not create any capital asset.

These expenses incurred for the imporvement in sales

So these should be treated like Advertisement Expenses which will have life more then one year.

CA Hitesh V. Sharma (Partner at MNNY & Associates) (29 Points)
Replied 10 December 2012

It is definitely going to be Capital Expenditure

ali (Student CA IPC / IPCC) (224 Points)
Replied 10 December 2012

Originally posted by : Pulkesh Mehta
	This expenditure cannot be called as Capital Exp. as there is no emergence of Capital Asset by this transaction. Deferred Revenue Exp. is those exp. which is to be charged against Revenue to be earned in upcoming years in ratio of revenue of respective years.As exp. incurred on shifting of Business to a convenient locality is exp. whose benefit will get accrued in upcoming years,therefore assessment test of ICAI is correct in this regard. Hoping,above explanation will clear your doubt.

VERY CORRECTLY SAID

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 14 December 2012

Conclusion from the above discussion is that 'shifting to a better location is a deferred revenue expenditure.

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