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Capitalization

RAVI MALOO (student) (62 Points)

13 January 2011

Dear All

Whether TATA Photon Plus (40Nos) purchased by an IT company would be treated as expenditure or will it be capitalized.

Thanking You

Ravi

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15 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 13 January 2011

Definitely expenditure

Madhusudan Kabra (knowledge seeker) (1779 Points)
Replied 13 January 2011

Dear Ravi,

Internet card once purchased by company is a property of company and it should be capitalised but if you think practically it has no market value after purchasing ........because this are not transferable.

Hence in my opinion it should be charged to P&L a/c in same year.....

Regards

Madhusudan

Suresh Prasad (www.aubsp.com) (15630 Points)
Replied 13 January 2011

It Should be charged to revenue A/c and not be regarded as Assets for the IT Co.

Kishore N S (Salaried Employee) (39 Points)
Replied 13 January 2011

I think Cost of each photon plus is less than 5000/- hence there is no need to break the head. you can charge to p & l account

Madhusudan Kabra (knowledge seeker) (1779 Points)
Replied 13 January 2011

Dear Kishore ji

There r 40 nos of TATA data card ........ hence collectivly it is a very big amount....
would your answer still remain same.

regards

Madhusudan

1 Like

Navin. M. J (Fresh Chartered Accountant) (103 Points)
Replied 13 January 2011

When taking into consideration 40 nos of same items, cost of individual item should be checked. individually if its less than Rs 5000/- then the same is taken to profit and loss account. besides the guarantee for the item does not exceed one year.there is no long term benefit. my opinion is take it to profit and loss account.

Rajeev Kumar singh (Article) (36 Points)
Replied 13 January 2011

It should definately a revenue item because Company have to Pay regular its subscrition

(Guest)

expenditure ..... n truly agree with tht every item in p&L should nt exceed 5000 if yes so ...then its disclosure should b there.

Vivek Raju P (Manager) (614 Points)
Replied 13 January 2011

capitalise them and then charge off 100% depreciation in the same year as value is less than 5000. This will ensure tracking of them as assets at a later stage and any loss may be charged to the employees.

Charging them to expenses instantly may not be a good practice, unless there is a very good tracking mechanism for small items.

3 Like