Hi Colleagues,
We have purchased an asset and there is maintenance agreement for the period of three years starting from 01 /04/2012- 31/03/2015 . The details are as follows:
The cost of an asset R 87 022.16, purchased 01/04/2012
Maintenance agreement R75 000.00 (For three years 01/04/2012- 31/03/2015).
The year end is 30 June each year.
What is the correct accounting treatment of the above scenario.
Thanking you in advance.
The asset needs to be capitalized by debiting the respective Asset A/c & crediting Supplier/Bank A/c.
Maintenance charges need to be charged to P&L A/c each. Are the charges of 75k for each year.
Is the organization a company or a partnership firm If it is an Co then deprcn needs to be charged or 3 months by applying the rates specified in schedule XIV. If it's a firm then depreciation needs to be charged for teh whole year & for the purpose of tax calculation it will be taken for whole year as well.
Hi Mashumi
The asset needs to be capitalised by debiting the Asset A/c & credi the Supplier/Bank A/c.
Maintenance charges debited to P&L A/c. for the 9 months remaining amount debited to prepaid expenses or party account. Further you need to deducted TDS on maintenance charges. in the second year the amount transferred to prepaid to profit and loss account. and remaining procedure as above.
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