Capital Expenditure Threshold

Cost Accounts 206 views 2 replies

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)

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 . 

Capital Expenditure has as regards no general rule.
But conventionally earlier as per Income tax act we used to write off assets under 5000.


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