Akash Sekhani (Article) (43 Points)
18 May 2011Any Expenditure incurred for maintainance of fixed asset is to be treated as Capital Expenditure.....
Now If any Horse purchase as a Fixed Asset and expenditure incurred for its fodder (food for horse), which is essential for maintaining its life....
Should said Fodder Expenditure be Treated as Capital or Revenue? And Why?
Give ur suitable comments.....
U S Sharma
(glidor@gmail.com)
(21056 Points)
Replied 18 May 2011
not everytime
all expenses for maintainance of capital goods can not be capitalized everytime,
viz if you bought a mobile ( capital goods) for 1000 and used refill for 10000 then is your capital good ( mobile) value comes to 11000?
spare parts , accessories which are above 5000 in single transaction are to be capitalized with principal, maintance charges will go in expenses.
NANDHINI
(IPCC)
(157 Points)
Replied 18 May 2011
ACCORDING TO ME,
IT SHOULD BE TRATED AS REVENUE EXPENDITURE.........
ANY EXPENSE MADE FOR MAINTAINING OF FIXED ASSET, WITHOUT ANY IMPROVEMENT IN ITS
CAPACITY WILL BE TREATED AS REVENUE EXPENSE.
HENCE,
NORMAL FOOD PROVIDED FOR MERE EXISTENCE OF HORSE SHOULD BE TREATED AS R.E
ANY SPECIAL FOOD PROVIDED FOR INCREASING ITS CAPACITY SHOULD BE TREATED AS C.E
THIS IS MY OPINION............
PLEASE WAIT FOR EXPERTS OPINION..................
Arvind Sharma
(ACA)
(1432 Points)
Replied 18 May 2011
As far I know, an expenditure will be treated as Capital Expenditure only in two case
First, expenditure incurrent for Fixed Asset upto to the date when it become ready to use ( As per AS 10) or put to use (as per Income Tax Act). Further In case of FA purchased out of borrowed fund which is in foreign currency, foreign fluctuation will also be capitalised even after that date, Interest thereon will not be capitalied. However, Forengn Fluctuation with respect to Interest Portion will be capitalised.
Second, expenditure incurred after put to use, which cause increase in capacity (in terms of working etc).
Other expenditure will all together either be Revenue Expenditure or nothing more.
All Expenditure incurred for maintainance of fixed asset is not treated as Capital Expenditure.....
only those expense which is incurred before putting the asset to use is to be treated as capital expenditure.. i.e expense incurred fr putting the asset to use is capitalised..
and further if any expense incurred increases the life or use of that asset then only if it will be capitalised..
in your case expense incurred for maintainence of capital asset will not b capitalised. it will only b charged to p&l a/c..
CA AMANPREET SINGH
(Chartered Accountant)
(284 Points)
Replied 18 May 2011
it is a REVENUE Expenditure as additional expenses are capitalised only if increases Asset's performance above original performance.
Admire to CA
(student)
(60 Points)
Replied 19 May 2011
Purchase of Horse is fixed Asset and Any expenditure incurred on it which doent increse its utility should not be capatialsed.and no depriciation is charged on the Horse.
Prabhaharan
(Internal Controller)
(57 Points)
Replied 19 May 2011
Hi Akash,
Purchase of Horse is Fixed Asset, and Capitalized in the books of accounts as Live Stock, Any appreciation or decrease in value is to be adjusted every year, keeping age and heath as a factor for arriving value. As far maintenance expenses is concerned it should be debited to P&L.
CA SAHIL MITTAL
(JOB)
(240 Points)
Replied 19 May 2011
Expenditure is to be capitalised if it improves the capacity of fixed asset beyond original capacity...
Any expenditure incurred just to maintain asset in its original condition is to be charged to P&L in same year as revenue expenditure..
Hence the aforesaid expenditure is revenue expenditure.
pawan
(Tax consultant )
(131 Points)
Replied 22 May 2011
AKASH
According to AS 10 HORSE is not fixed asset. fixed asset means to reduce the value of assets by charging depreciation, but on horse As livestock u can't charged depreciation on it,
So expenditure on fooding of horse is revenue EXPEDITURE
NANDHINI
(IPCC)
(157 Points)
Replied 29 May 2011
| Originally posted by : pawan | ||
 |
AKASH According to AS 10 HORSE is not fixed asset. fixed asset means to reduce the value of assets by charging depreciations revenue EXPEDITURE |
 |
WHICH MEANS ALL NON DEPRECIABLE ASSETS (LAND) WILL NOT BE TREATED AS FIXED
ASSET?....
CAclubindia
