capitalisation of int.on loan

Interest or Financial charges on anky kind of Fixed Assets cannot be classified

as per Income Tax and Accounting Principles & Practice.

Interest can not be capitalised but u can claim it as expenses.

u can claim depreciation on cost.

what about AS 16 in this regard.......???

as 16 does not allow interest capitalization on assets which are ready 2 be put 2 use. Theese assets are not considered as qualifying assets.

At the time of Buying Vehicle

Dr Vehicle A/c - 5 lakh

Cr Vendor Loan A/c - 5 Lakh

When EMI is paid

Dr Vendor A/c - With the priciple amount

Dr Interest A/c - With the interest amount

Cr Bank A/c- With the Total EMI amount

Suggestions,Criticisms and advices Welcome... 

Interest can be claimed as expenses and  the Interest Liability  you have to  ACCOUNT as Prepaid Financial Charges