Registration certificate & Insurance

Please advise how to book insurance and registration certificate Charges.1st year insurance ( Truck ) period 18 March to 17 March 2022 under capital or exp also suggest for RC
Replies (4)
Quick Summary
This discussion clarifies how to account for truck insurance and registration certificate charges. Registration fees should be capitalised as part of the truck's cost under AS10, depreciated with the asset. Insurance, however, is treated as a prepaid expense or financial instrument, not an intangible asset for amortisation. The advice covers initial capitalisation, expensing, and accounting for insurance claims.

Capitalize insurance and registration expense as well as part of the cost of the truck.

Thank you Poornima madam,

Yes capitalise registration fee into the carrying amount of the asset as per as10 standard because it does not qualify as an intangible asset because you can control, identify, but there is no future economy mic benefit. That means these charges are depreciated along with asset and not amortised.

Next, insurance contracts for policy holders is an intangible asset which does not fall under the scope of intangible assets for you to amortise after initial capitalisation. It is treated as a financial instrument prepaid insurance. 

Prepaid insurance a/c 1000

To Cash a/c 1000

then 

Insurance expense a/c 1000

To Prepaid insurance a/c 1000

What is the us of this CMA Poornima when it can be expensed initially as allowable? When the car gets damaged,

its 

Debtors a/c

To Insurance claim a/c

here as the carrying value of insurance is not reducing, cedant or insuree treatment is not prescribed. 

 

Sum assured -Asset -Capitalise
Policy Amount -Expense -Revenue Nature

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