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Capitalisation of expenses

688 views 4 replies

Shridhi Jain

Company Secretary

1678 Points Joined July 2009

Dear members,

Pls tell me what is meant by capitalisation of expenses ? And what is the accounting treatment for that ?

In tally, can we know which are the capitalised expenses and which are not ? How?

Thanks...

Replies (4)

Capitalisation of a expense means debiting the Assets to which the expense belongs rather to a expense account. You can check the addition to the Assets account.whether addition made or not , if made it means capitalised.

Shridhi Jain

Company Secretary

1678 Points Joined July 2009

Ya thats right , in capitalisation we add the expense to the value of that asset. Are there any guidelines to know which expenses are to be capitalised and which are not...?

Thnks for reply...

Vinit

CA Final

188 Points Joined January 2011

Actually it depend upon the nature of expense. some of which are 1)If that expense enhances the capacity of the assets significantly.2) increase the working life of the assets. 3) Expense relating to purchase of new assets. 4) Any other major addition.