Amount paid to purchase mobiles

Others 1714 views 23 replies

CA koteswara Rao

Asst. Manager

240 Points Joined June 2010

In our company as per the grade of employees they are entitled for procurement of mobile phones, at first yhey purchase mobile they desired and then they submit the bills and claim the entitled amount (entitled amount is 6000 however they are free to purchase any value mobile we reimburse only 6000)

In the above scenario, now a question arised whether these mobile hand sets are to be capitalised or directly the claimed amount of 6000 is to be charged to P&L A/C ??

If it is to be capitalised then wat value to be taken? mobile handset cost or 6000?

one more thing.. they are used for 4 years, after that they are eligible for new mobile and old mobile need not to be deposited with the company.

pls help out dears...

Replies (23)

Mihir

Wealth Manager

5293 Points Joined December 2008

Mobile phones costing more than Rs. 5,000/- should be capitalized.

CA Pallav Singhania

IT System Auditor

33683 Points Joined April 2010

if such amount is to small for the co. then it should be charged in P/L....if not then capitalized...

ACMA Obulirajan R

M.Com ACMA

1119 Points Joined April 2009

Please capitalise the mobile phone for the value of Rs.6000/-. After 4 years you can scrap the same. Then again purchase new mobile and go for capitalisation.

Jitender

Chartered Accountant

8724 Points Joined May 2007

prima facie, it seems that mobile phones are not in control of the company as it is not not even gathered after 4 years, hence it should not be treated as assets.

It should be expensed as personnel cost and should be considered as perk for TDS on salary.

vikas Agarwal

Article & Ca Final Student

125 Points Joined May 2011

Satisfy With Jitendra

valji

Accounts manager-MBA

2150 Points Joined July 2008

debited to profit & loss accounts agree with mr jitendra

sameet

Associate Consultant

27 Points Joined April 2011

It should be debited to Profit & Loss Account (This practice is adopted by most of the Companies).

Hitesh.B

Self Employed

31 Points Joined February 2009

Agree with jitender, valji and sameet. Entire 6000 shud b treated as an expense only. One more argument against capitalisation is that if an employee buys a handset for Rs.4000 only and still the company pays 6000 as a standard amount, it would be wrong to capitalise the entire 6000.

Hence full amount is only a perk and to be expensed off to p&l.

Amit Gupta

Loosening Myself

1508 Points Joined January 2009

Originally posted by : Jitender
	prima facie, it seems that mobile phones are not in control of the company as it is not not even gathered after 4 years, hence it should not be treated as assets. It should be expensed as personnel cost and should be considered as perk for TDS on salary.

AGREE

Rakesh

Executive- Commercial & CMA final studen

179 Points Joined August 2011

Hi..Its depends upon company policy..However if company is of good size then they may debit it directly to P&L a/c...or else they can capitalise it & then provide the depreciation over the period of 4 years..

CA. Saurabh Agrawal

CA in industry

147 Points Joined August 2008

agree with Mr. jitendra

Harshal Pramod Baser

Jalgaon

45 Points Joined September 2009

Jitendras' suggestion is viable

arjun s

CA Final

299 Points Joined August 2008

As per materiality u can capitalize any asset which is more than 5000 but how do you prove the existence of that asset as it is distributed among your employees. hence it is better to treat has staff welfare expenses