Two Accounting Entries

Hye Guys, first of all “HAPPY NEW YEAR” to all readers ……..

 

I want to ask two questions here ……..

 

1) What entry to be passed for repairing faulty memory slot in mobile?

 

Shall I debit ‘Mobile A/c.’ or shall I transfer it to ‘Repairs & Maintenance A/c.’? When we debit the asset account for repairs expenses, it means that utility of an asset has been increased and when it doesn’t mean that, we debit it to the P&L A/c. I want to ask that how we can calculate utility in respect of mobile? If it is in terms of satisfaction / enjoyment, yes, it has been increased because now I can enjoy songs & music which I couldn’t due to faulty memory slot. If it is not in those terms, then I guess, utility has not increased. Kindly tell me the right entry.

 

 

2) What entry to be passed for installing software on Computer?

 

I guess, softwares are always installed on computer to increase its utility. In this manner, I will debit the ‘Computer A/c.’ Am I right?

 

Replies (4)

Well your query has to be answered considoring GAAP & IT:

1. For both income tax & GAAP/companies act, it shall be considered as revenue expenditure as it is just maintaining the expected level of efficiency/utility.

2. From GAAP/companies act software is an intangible asset. Hence it shall be capitalised.

     However from iT point of view it shall be considered as revenue expenditure. Of course the A.O. shall always argue in favour of capitalisation, but we have SC & HC case laws for it.

installing software is capital expenditure and repair is revenue expenditure

Memory slot (consider materiality yaar -even calculator provides benefit for more them one year do we capitalise it) so for one or five memory plot just dr it to repairs but for more a too expensive dr. Mobile as it is part of assets and can't be used independantly ) now software, if requires annual maintenance dr. To repairs then debit repairs otherwise capitalise it)
this is a capital Natuire Exp. so computer A/c Dr to Cash/Party A/c

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