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Asset capitalization

Deepti (Service) (38 Points)

29 May 2008

We have purchased following items

Dell E 198FP 19" Flat Panel LCD Monitor (10 nos) Rs 122408 (per unit cost 10500)

Dell E 198FP 19" Flat Panel LCD Monitor (5 nos) Rs55640

HP Usb Keyboard and Mouse Rs 17000 ( per item Rs1100)

As per the companies policy, the above is less than USD 2500 per item basis, so it should be expensed off. Please advise if this is ok as per Indian accounting standards.

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11 Replies

manjula (Articles Asst) (641 Points)
Replied 29 May 2008

sir

it is in usd first convert it to INR so it will be around (2500*41) 102500 each so it should not be charged off to P/L account

it is against our AS10 & AS 7 so please charge dep

Deepti (Service) (38 Points)
Replied 29 May 2008

Dear Manjula,

per unit cost is in INR. i.e, Rs10500 each unit cost). The limit to detemine whether it should be expensed or capitalised is usd 2500 per item.

SSA JI (Ca Final ) (1970 Points)
Replied 29 May 2008

as u are accounting in india and there is nothing in my knowledge written in accounting standard but the smaal purchase related to computer accessories should be debited in p/l a/c under the head of repaires and maintenance of computer

Ramkrishna (Accountant) (325 Points)
Replied 29 May 2008

YOU FIRST DECIDE BY THE NATURE OF THE CAPITAL ASSEST...HOW IT BE DISPOSE...WHETEHR IT IS GOING TO ADD AS ACCESSORY OF ANY SYSTEM RELATED TO MANUFATCURING...IF YES THEN WILL IT INCREASE THE EFFICIENCY OF PRODUCTION...DIRECTLY OR INDIRECTLY....IF ANS YES THEN ANY SORT OF AMOUNT CAN BE CAPITALISED........

IN YOUR CASE IF YOU ARE NOT DOING BUISNESS OF BUYING & SELLING OF COPMUTER & ITS PERIPHRALS.......THEN LOOKING AT THE INVESTMENT OF HUGE SUM ...I AM SUER AS PER ACC. STANDARD IT HAS TO BE CAPITALIZED...

Bharat (Service) (22 Points)
Replied 01 July 2008

EXCISE DUTY PAID ON TRANSFER OF ASSETS( FROM MAHARASHTRA TO UTTARANCHAL(EXEMPTED ZONE FROM EXCISE DUTY) WHETHER TO CAPITALISE IN BOOKS OF UTTARANCHAL(EXEMPTED ZONE) PLANT OR NOT?

ANY CHANGE IF THESE MACHINERIES ARE SECOND HAND.

arun (ca student) (194 Points)
Replied 03 July 2008

First of all you have to tell wether this purchase of computer is replacement or just addition. Suppose if you replace your 128 mb RAM from 64 mb Ram then it is addition and should be capitalised and if you replace a new one moniter from old demage one then it shoud be repair an maint.

C.k.chamy (264 Points)
Replied 25 July 2008

Hello Mr. Arun ,

If i replace 128 Ram

it should be capitalized ?

krunal patel (Article) (23 Points)
Replied 11 February 2011

If i purchase or replace UPS, can it be capitalized ?

CA Pramod Kulkarni (Practicing Chartered Accountant) (80 Points)
Replied 11 February 2011

Hi Deepti,

In as you are doing maintaining accounts in india and company is working in india, it is governed under the companies Act, and the Provisions of the said Act has to be followed. As narrated in Cos Act the assets which are below Rs.5,000 can only be expensed off. So the assets purchased by the company should be capitalized and depreciation should be claimed as per AS 6 . And as per Indian AS-10 the said assets going to increase the life of the assets and also it is going to be the integral part of the said assets so it should be calitalized.

Thanks

Pralay Chakraborty (Service) (482 Points)
Replied 22 February 2011

Hi All,

Weather a purchase to be treated as an asset or not completely dpends upon its nature & the purpose for purchase.I completely agree with Ramakrishna,as he said weather it has increased Production or not??but thing is every new puchase or addition may improve or increase production,we have to decide weather a purchase or addition is directly linked to the production or not??along with this one has to consider its nature..