Loss by fire of cwip asset

Hiii...

How to treat Loss by fire of Machinery lying in CWIP, whether it is Capital Loss or revenue loss??

Can we debit such expenses to P&L or Not? (Accounting treatment)

 

What will be the treatment for Tax purpose, whether such loss is allowable as business loss?

 

Thanks & Regards,

Abhishek

 

Replies (2)
Since loss is incurred, you need to transfer the amount of loss in the books. I'd suggest you to transfer it to p&l appropriation account as I believe it to be capital loss. it's a loss of abnormal nature. Also, the cwip was incurred to avail enduring benefit hence was a capital expenditure. Therefore I consider the loss to be of capital nature. Further I believe the expense is not an allowable expense for taxation purpose.

It is a loss of capital nature and should not be transferred to p&l a/c . Being a loss of capital in nature , it will not be allowed for taxation purposes also. 

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