Treatment of Expenditure Query

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.

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..................

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..

it is a REVENUE Expenditure as additional expenses are capitalised only if increases Asset's performance above original performance.

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.

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.

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.

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

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?....