Emi purchases of fixd nd current asset

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Ramakrishnan

Student

81 Points Joined December 2011

Dear Frnds.. Clarify the below transaction in Both Financial books nd Stmt of Total Income.... If an Company acquires Both Furnitures nd Machinert (Both Fixd Asset nd Cur.Asset) under EMI means.... Wht vl to do regards., Interest nd Principal amount AND also Depreciation.. Assume used d above's @ 180/More days in business. :)

Replies (2)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

when you purchase the above assets on loan, then you will create an loan account for teh above under Non-current liabilities.

While paying the emi the interest component would go to P&L and principal would get reduced from the loan account. For loan taken for furniture you cant capitalize teh interest to furniture. It shud go to P&L

As the furniture is put to use for more than 180 days the full depreciation as per I-T act would be applicable. In financial books depreciation as per SLM/WDV as the case may be should be charged.

Ramakrishnan

Student

81 Points Joined December 2011

I assume for fixd assets Priniciple+Interest=Value for Depreciation nd "NO Interest"allowed to P&L acc due to capitalization...Then for Current Asset Interest-P&L acc nd Principal-loan acc AND for...... Stmt.of.Tot.Income Both Dep's (fixd & current assets @ 10%) with current asset's interest also... Am i correct...?