LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

FIRST INSURANCE OF CAR

CA Rahul Jain (Job) (148 Points)

24 June 2010

WHETHER FIRST INSURANCE TAKEN AT THE TIME OF PURCHASING OF NEW CAR IS TO CAPITALISED OR NOT.?

Reply
Follow
Share

4 Replies

Bhavik Davda (Proprietor) (238 Points)
Replied 25 June 2010

Dear Rahul,

if it is coming with the car vendor invoice, you can capitalise it or you can taken it as revenue. Generally car vendor has tie up with the insurance company for having such type of insurance and it is being added to the cost of car as without insurance payment car can not be taken to home.

Regards,

Amir (Learner) (4016 Points)
Replied 25 June 2010

Hi Rahul,

With due respect to Bhavik dada,

First insurance shall be capitalised. Further, there is no option as such, whether it is coming with vendor invoice or not since as per Motor Vehicles Act - Insurance is mandatory before you can use the vehicle.

Para 20 of AS-10 reads as under -

The cost of a fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.