Should mobile phones purchased by the company given to the staff for their use, be capitalised ?.... or should they be written off as an expense in the relevent year?...
CA Sumit Arora
(CA)
(1410 Points)
Replied 23 August 2010
Mobile phones should be capitalise because they are assets of the company...
Kalpesh Chauhan,
(Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com))
(8310 Points)
Replied 23 August 2010
Amit Nishania
(CA Final - Student)
(495 Points)
Replied 23 August 2010
its depend upon the company policy, in some company mobiles phones comes with the welcome kit which is never demanded back so u cann't keep it in the assets side as it is a joing gift and it the company can demand the set on termination or resignation then mobile should be recorded as assets in books.
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 23 August 2010
It depends upon materiality of such expense and future benefits involved.
Suppose Reliance Industries purchases 12 Nokia mobile Phones worth Rs 24000. On the other hand your CA firm purchases same 12 Nokia mobile phones worth Rs 24000. In such case RIL will not carry this expense in its B/S considering its turnover and ruthless use of mobile phones by its employees. It will be charged to P&L in that year itself and will not be capitalized.
Same expense of Rs 24000 will be material for your CA firm. Your CA will want to capitalize it and charge the total cost of its purchase by allocating it to various years.
It all depends upon the facts of case .Hope you got my answer.
Rohan
(Chartered Accountant)
(50 Points)
Replied 23 August 2010
But when my auditor saw that... he said it is better to claim it as an expense rather than capitalizing it....so he changed the entry and debited to expense acc.... i had no grounds to argue at that point of time...i was in a dilema....
| Originally posted by : Sumit Arora | ||
 |
Mobile phones should be capitalise because they are assets of the company... |
 |
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 23 August 2010
I hope you got my answer as to why your Auditor would have allowed it as an expense. Read my above post and link it with your client case. I am sure you will be satisfied with your Auditor way of treating the same.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 23 August 2010
My view would be to capitalise under the head Office Equipments bring it into inventory and then write off inorder to have a better control
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 23 August 2010
HI FRIENDS,
DEPENDS UPON THE CASE TO CASE.
IF MOBILES ARE GIVEN TO STAFF AS A GIFT OR INCENTIVE FOR THEIR PERONAL USE, IT FORMS PART OF STAFF WELFARE, SINCE PROPERTY IN GOODS PASSED ON TO THE STAFF PERSON. AND IN SUCH A CASE, CAPITALISATION SHOULD NOT BE DONE.
HOWEVER IN THE OTHER CASE, IF THE MOBILES ARE GIVEN TO STAFF FOR OFFICE USE AND SATFF HAS TO GIVE BACK THOSE MOBILES AT THE TIME OF TERMINATION/ RESIGNATION/SUSPENSION, THEN PROPERTY IN GOODS DOESNOT PASSED ON TO THE STAFF MEMBERS. AS SUCH, IN THAT CASE IT SHOULD BE CAPITALISED.
REGARDS,
MANOJ
CA lakshmikanth
(Chartered Accountant)
(238 Points)
Replied 23 August 2010
Ranotosh Podder
(ca student)
(394 Points)
Replied 23 August 2010
| Originally posted by : lakshmikanth | ||
|
|
As per my knowledge first question is not mobiles gives to staff their personal use or company property the question is whether mobiles phones is capitalised or not? here four things involved 1. Schedule VI of companies act 2. Materiality concept 3.AS-10 4.AS-6 AS per SCH-VI Below 5000/- is strightly charged to revenue AS per materialily item is taken individual basis not group basis so mobile cost is below 5000/-charged to revenue as per AS-10 an asset useful more than one year as per AS-6 an asset depreciated over use ful life of asset finally all above conditions satisfied no wrong to capitalised the moblie phones But generally AS per companys act stright line method followed so moblie phone is classified office equipment but DEP % is 4.75% so if mobile is charged dep over 21 years here mobile is practically worked 20 years? answer is NO so again AS-28 comes into picture so mobile phones is charged into revenue |
|
Thanks for your in depth analysis.
ravi
(unemployed)
(185 Points)
Replied 23 August 2010
depends from case to case...n how much material is tht amt reg 2 books
krishna Teja
(CA Final)
(85 Points)
Replied 24 August 2010
When the utility of the item purchased extends beyond 1 year , the amount spent will be in the nature of capital expenditure. Mobile phones, which have utility of more than 1 year, should be capitalized irrespective of purchase cost or the manner they are utilized.
Some companies have the policy of writing off assets below certain cost (say Rs 10,000/;-). Also according to Companies Act ,1956, assets worth less than 5000/- can be charged to p&L A/c instead of showing them as assets. But for that, the company should have a policy and such a policy should be disclosed in the Notes on Accounts.
Even though the assets are written off completely in the year of purchase, they must be entered in the FA register and the fact of writing off should be mentioned in the register.
First, the asset should be capitalized by making an entry and then it should be written off.
Asset A/c Dr
To Vendor/Bank
P&l A/c Dr
To Asset A/c
DIVYA MITTAL
(AUDIT ACCOUNTS&TAX EXECUTIVE)
(67 Points)
Replied 24 August 2010
IT DEPENDS on the materiality,Some Companies Is to be Capitalised & Some Companies Shown as a revenue expenditure.But as per my opinion it is to be Capitalised & as per companies act in the calculation of Dep. its value is less than 5000 as a single item ,then it is to be written off.
GST Live Certification Course (39th Batch) - April 2024 (Weekend Batch) (With Certificate)
"Live class on Python for Financial Analysis: Unlocking Efficiency in Accounting and Finance"
CAclubindia
