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Installation cost

aashish (student) (28 Points)

22 December 2014

should installation cost of old assets to a new place of operation be capitalised?

asset is electronic items like fans and lights

installation cost includes cost of labour, wirring etc

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7 Replies

Hitesh (Chartered accountant) (382 Points)
Replied 22 December 2014

installion cost of old assets is to be charged off to profit & loss a/c & not to asset ..

c b chauhan (article) (31 Points)
Replied 22 December 2014

It should be capitalised as installation cost was incurred on replacement

vivek (Employee) (32 Points)
Replied 23 December 2014

Its not an improvement efficiency is not increasing...charged to pl

vivek (Employee) (32 Points)
Replied 23 December 2014

Its not an improvement efficiency is not increasing...charged to pl

Arif Ali (Apt Co Advisory) (1230 Points)
Replied 23 December 2014

it is not improving the life and efficiency of fan, etc so it should be charged to capitalised to fan,etc.However give the note to Notes to Accounts of the balance sheet.

Shivani (Learner) (1881 Points)
Replied 25 December 2014

I think labour and wire charges will be capitalised at the time of buying new fans and also at the time of installing old fans at the new place. the utility it is adding to fan is that it will make the 'fan work'. Fan is useless if it doesn't work. But then it makes me think that by this logic repairs to fan should also be capitalised but that go as indirect expenses. kind of confused now

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 11 March 2015

Do not assign the following costs to a fixed asset:

Administration and general overhead costs
Costs incurred after an asset is ready for use, but has not yet been used or is not yet operating at full capacity
Costs incurred that are not necessary to bring the asset to the location and condition necessary for it to operate
Initial operating losses
New customer acquisition costs
New facility opening costs
New product or service introduction costs
Relocation or reorganization costs