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Capital Expenditure Threshold

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Valerian Vincent

Director

21 Points Posted on 24 August 2020

Hi,

Currently, we are using the Rs 5,000 rule to capitalize, meaning anything under 5,000 gets expensed to P&L.

The question I have is, can we as a company say, we only want to capitalize 1 Lakh and above, as for us anything under 1L is immaterial.

Thanks in advance.

Replies (2)

Quick Summary

A company is currently expensing items under £5,000 and wants to know if they can raise this threshold to £1 Lakh, deeming smaller amounts immaterial. However, the general consensus is that specific limits for capital expenditure aren't fixed and depend on the nature of the asset. While there was a convention to expense assets under £5,000, it's advised to consult with a company's chartered accountant for definitive guidance.

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 24 August 2020

No , I do not think its correct procedure . You can not fix any limit for capital expenditure because for .i .e purchase of Mobile Phone for RS say 30000 /- or 4000/- or purchase of Vehicle of Rs 65000/- are an assets of the Company . you have to capitalize such expenditure you can not show in profit & Loss account . This is my opinion , you can consult with your company C.A or others on this issue .