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Cost of Fixed Assets

Mohammed Dalal (Chartered Accountant) (163 Points)

01 June 2011

Dear All,

One of My clients have imported a Fixed Assets.It has included in the cost of Fixed Assets the hotel bills of the technical engineers called for installation and testing of the Machinery.

Is it proper?

Also are Bank Charges allowed to be capitalised if the same are paid in connection with the P&M

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8 Replies

CA Nitu Agarwal (CA, M.Com) (266 Points)
Replied 01 June 2011

All the expenses incurred to bring the capital asset into use should be capitalised. So hotel bills paid for technicians will be capitalised.

Bank charges paid are for using the services of the bank, so it can be claimed as revenue expense.

CMA. Rakesh Kataria (Practising Cost Accountant) (531 Points)
Replied 01 June 2011

hotel Bills of techinical staff involved in the installation of the machinery will be added in the cost of the machinery

Bank charges will be charged as revenue expeses, but after the IFRS implementation it will be added in the cost of the machinery till the machinery become put to use.

Pothuganty sudheer (Consultant, C.A, C.S) (411 Points)
Replied 01 June 2011

I agree with the above posts.

As Hotel expenditure would not have been incurred but for installation which is necessary for bringing the

capital asset into use.

Abishek (Student) (1108 Points)
Replied 01 June 2011

Hotel charges , travel charges and refreshment charges of those foreign people should be capitalised to the cost of machinery

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 01 June 2011

all the expenses you have given in question will be capitalised except bank charges

Mukesh Kumar Singh (CA-FINAL) (4094 Points)
Replied 02 June 2011

All the expenses you have mentioned in your question must be capitalised.

The hotel bills of the technical engineers called for installation and testing of the Machinery is the expenses of the capital nature that's why after taking reference of AS-10 and AS-16THE ABOVE TREATMENT IS TOTALLY CORRECT

Suraj S (Audit Executive) (335 Points)
Replied 03 June 2011

Hi all....

Can u tell me why we can't capitalise bank charges incurred in connection with P&M??

T. MARUTHI VENKATESWARARAO (DGM - FINANCE & ACCOUNTS) (21 Points)
Replied 31 May 2012

Originally posted by : Mohammed Dalal
	Dear All, One of My clients have imported a Fixed Assets.It has included in the cost of Fixed Assets the hotel bills of the technical engineers called for installation and testing of the Machinery. Is it proper? Also are Bank Charges allowed to be capitalised if the same are paid in connection with the P&M