Capitalization of specific machine

Whether Cost of Capitalization of a machine includes raw material or semi finished goods utilized for trial run of a machine.

This is not a new project but a new machine has been imported for an existing business for specific purpose

CA K. K. Srivastava

Replies (18)

No,FG and SFG utilised during the trial run are not capitalised,rather the sales realisations of the produce is deducted from the trial run expenses. Rectify me if I m wrong

yes it will be capitalised

any expense incurred on trial run of the machinery should be capitalized                          

Originally posted by : future ca

yes it will be capitalised

As per provisions of AS 10 'Accounting for Fixed Assets',

expenditure incurred on startup and commissioning of the project, including the expenditure incurred on test runs and experimental production, is usually capitalized as construction cost.

However, the expenditure incurred after the plant has begun commercial production i.e., production intended for sale or captive consumption, is not capitalized and is treated as revenue expenditure that will go to P/L Accounts ...  

 

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Anit

Originally posted by : Anit

As per provisions of AS 10 'Accounting for Fixed Assets',

expenditure incurred on startup and commissioning of the project, including the expenditure incurred on test runs and experimental production, is usually capitalized as construction cost.

However, the expenditure incurred after the plant has begun commercial production i.e., production intended for sale or captive consumption, is not capitalized and is treated as revenue expenditure that will go to P/L Accounts ...  

 

-----------------------

Anit

Good Explaination ...

agree with Mr. Anit

 

Originally posted by : future ca

any expense incurred on trial run of the machinery should be capitalized                          

 Yes i too feel the same... it should be capitalised.... even though it is not a new project....

yes it is very clear with AS 10... it will be capitalized..

Expenses on trial run will be capitalised..

Originally posted by : vandana

yes it is very clear with AS 10... it will be capitalized..

AGREED.

Sir,

AS - 10 is very clear on the query you asked.....
 

If the trial run is successfull one then it should be capitalised otherwise it will be charge to P & L A/C.

As per AS-10 it should be capitalised 

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