04-15-2007, 07:58 PM
Hello all.
I would like to seek your comments on the following situation.
Suppose Company X has a capitalization policy of Rs 5,000 (i.e expenditure of capital nature above Rs. 5,000 be capitalized while that falling below this threshold be expensed out). Now the company purchases the following from a supplier in a single transaction.
> 5 Chairs (Rs 2,000 each) - Rs. 10,000
> 4 Tables (Rs 1,000 each) - Rs. 4,000
> 1 Conference table - Rs. 10,000
Total Amount Paid - Rs. 24,000
The question thus is, how will the above transaction be treated in light of the company's capitalization policy?
> Should we compare the value of the transaction (Rs. 24,000) against the threshold (Rs. 5,000)?
> Should the value of each furniture type (i.e Rs. 10,000 for 5 chairs) be compared with the threshold (Rs. 5,000)?, or
> Should the value of a single item (One chair - Rs. 2,000) be matched against the threshold?
Regards,
I would like to seek your comments on the following situation.
Suppose Company X has a capitalization policy of Rs 5,000 (i.e expenditure of capital nature above Rs. 5,000 be capitalized while that falling below this threshold be expensed out). Now the company purchases the following from a supplier in a single transaction.
> 5 Chairs (Rs 2,000 each) - Rs. 10,000
> 4 Tables (Rs 1,000 each) - Rs. 4,000
> 1 Conference table - Rs. 10,000
Total Amount Paid - Rs. 24,000
The question thus is, how will the above transaction be treated in light of the company's capitalization policy?
> Should we compare the value of the transaction (Rs. 24,000) against the threshold (Rs. 5,000)?
> Should the value of each furniture type (i.e Rs. 10,000 for 5 chairs) be compared with the threshold (Rs. 5,000)?, or
> Should the value of a single item (One chair - Rs. 2,000) be matched against the threshold?
Regards,
