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Accounting of fixed assets - computer

Jayanthi (jao) (54 Points)

26 October 2013

Pls explain whether an replacement of Hard disk or a monitor in a computer qualify for accounting under fixed assets? If it is treated as Revenue expenditure, pls elucidate.

Thanks.

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42 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 26 October 2013

No it will be treated as Capital Expenditure....because Hard disk and monitor replacement will enhance the previously assessed working capacity of system

2 Like

CA girl (Article Trainee-CA Final) (1942 Points)
Replied 26 October 2013

What if the new hard disk and the monitor are exactly of the same type that was used earlier?? In that case it would just replace the existing hardware...there is no enhancement in the capacity of the computer right?

1 Like

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 26 October 2013

See Divya...the system with new hard disk will work better than that with old hard disk...thats why there is improvement in capacity and the cost for such replacement(improvement) can be capitalised...

1 Like

CA Pallav Singhania (❤ Work Hard Party Harder ❤) (32532 Points)
Replied 26 October 2013

if such expenditure enhances the performance or increases the life of the asset then such expenses should be Capitalized...

or Else charged to Profit/loss A/c.

Diinesh Jain (Accountaint) (26 Points)
Replied 26 October 2013

In Openion Replacement of hard disk or a moniter in a computer doesnot quality for accounting under fixed assets because it s a revenue expenditure and the benifit of such expenses cannot be treated as fixed expenses

1 Like

manoj (student) (5205 Points)
Replied 26 October 2013

it is a revenue expenditure

1 Like

Abhinav (student) (564 Points)
Replied 26 October 2013

Revenue expenditure

1 Like

JATIN KAKKAR (Student CA IPC / IPCC) (39 Points)
Replied 27 October 2013

if it is specifically mentioned in question capactiy will be enhanced then take it as capex otherwise take it as revenue expense. dont be confused.

1 Like

V K Vijayaraghavan (PRACTICE) (186 Points)
Replied 27 October 2013

You have to write off old PC and capitalise

karan narula0718 (article) (27 Points)
Replied 27 October 2013

If capacity of the principal asset is enhanced by the expenditure than we should have to capitalised that expenditure for eg:-if in old hard disk(previous hard disk) ,storage capacity is 40gb But in new it is 80gb than we should have to capitalised it But if the storage capacity is same as old harddisk ie.,40 gb than no need to capitalized the expense

Akhilesh Shrivastava (Manager (F&A)) (35 Points)
Replied 27 October 2013

Revenue expenses....

umesh jain (mahanandir) (21 Points)
Replied 27 October 2013

It ll be capital expenditure bcoz it replaced major part and enhance capacity of computer to work faster and better.

venkata kiran (officer) (26 Points)
Replied 27 October 2013

Replacement of hard disk do not enhance the computing power of a pc,in the above case if a server is being maintained for running an accounting software and addition o hard disk increases the storage capacity then treat it as capital expenditure,usually hard disk fails rarely And are usually covered by warranty for a periodof 3+ years and are replaced free of cost. So in the above scenario it is better if it is treated as revenue expenditure as cost of hard disk rarely crosses 10% of the cost of the computer.The same yard stick can be used for monitor too depending on the reason and the cost incurred in replacing the monitor.

1 Like