vasudeo007

 Profile Answers by vasudeo007 

• Aug 18th, 2008

 

When any fixed asset is purchased then all costs related to installation of the machinery and repairy (only major repairy) are capitalised.

There can be quite number of expenses associated with the asset which are of revenue type expenses. They would be incurred as and when production starts.

Examples of revenue expenses are:
a. oiling
b. cleaning
c. painting that part which gets eroded with use
d. changing spare parts which need replacement after specific hours of use
etc.

The above expenses are not capitalised. They are debited to profit and loss account.

While all other type of expenses which are incurred very infrequently are capitalised.

Vasudeo