Loading....
Coupon Accepted Successfully!

 

Classification of Expenditure 

 

S.N

Item of Expen­­­­­­­­d­i­ture

Nature

Reason for Classi­­fica­tion

1.

Expen­ses on a For­eign Tour to pur­chase a machi­nery

 

Capital

These are in­curred to ac­­quire a ca­pi­­­tal asset

2.

Cost of Mac­hi­­nery Pur­cha­sed

Capital

These are ­to acquire a cap­ital asset

3.

Insurance & Freight on Machi­nery purcha­­sed

Capital

These are in­­curred to acquire a ca­pital asset.

4.

Custom Duty on Im­por­ted Machi­nery

Capital

These are in­curred to acquire a ca­pital asset

5.

Wages for erection of Machinery

Capital

These are incurred to put the Ca­pital Asset to use.

6.

Install­­ation Charges of a Machinery Purcha­sed

Capital

 

These are incurred to put the ca­pital asset to

7.

Expenses in­curred on trial before the asset is put

Capital

These are in­curred Run to use

8.

Cost of a Second hand Mach­in­ery Pur­cha­sed

Capital

These are in­­curred to acquire a ca­pital asset.

9.

Repair  of a second hand machi­n­ery before put to use

Capital

These are incurred to put the ca­pital asset to use

10.

Interest on a term loan for the pur­ch­ase of mac­hin­ery. The comm­er­cial pro­duc­tion has not begun till the last day of the account­ing year.

Capital

These are incurred to acquire ca­pital asset & the comm­ercial pro­duction has not yet begun.

11.

Interest on a term-loan for the pur­chase of mac­hinery. The comm­er­cial pro­duc­tion has al­ready begun.

Revenue

The comm­ercial pro­duction has already begun.

12.

Repairs of Mach­ine after the mac­hine is put to use

Revenue

These are  incurred to main­tain the capital asset

13.

Amount sp­ent for re­place­ment of worn out part of ma­chine

Revenue

These are in­curred to main­­tain the capital asset.

14.

Annual Maint­enance fee of a mac­hine

Revenue

These are in­curred to main­­tain the capital asset.

15.

Money spent to reduce wor­king expe­nses

Capital

These are in­curred to acquire long term bene­­fits.

16.

Amount spent for replace­ment of a petrol dri­ven ori­gin by CNG Kits

Capital

These are incurred to reduce the ope­rating costs and the­reby in­creasing the profits

17.

Cost of Rings & Pistons of an engine chan­ged to get fuel effi­­ciency

Capital

These are in­curred to reduce the ope­­rating costs and thereby in­creasing the profits

18.

Overhaul­ing expen­ses for the engine of a motor car to get bet­ter fuel effi­ciency

Capital

These are in­curred to reduce the ope­­rating costs and there by in­creasing the profits

19.

Legal ex­pen­ses to acquire a building

Capital

These are in­curred to acquire ow­ner­­ship rights of the capital asset.

20

Legal Ex­pen­­ses to defend a suit claim­ing that firm’s fac­tory site belongs to plain­tiff

Revenue

These are in­curred to maintain the capital asset.

21.

Amount spent on re­paint­ing an old buil­d­­ing for the first time on pur­chase

Capital

These are in­­curred to put the cap­i­tal as­sets to use.

22.

Amount spent on annual re­pain­ting of building

Revenue

These are in­­curred to main­tain the capital as­set.

23.

Expen­ses to obtain a lic­ense for starting a fac­tory

Capital

These are incurred to main­tain the capital asset. (i.e. right to carry on busi­ness)

24.

Annual Re­newal fee of Licence for next year

Revenue

 

These are in­curred for the cons­­truc­tion of buil­ding and hence to be capitalized with the cost of building

25.

Amount spent for the cons­truction of temporary huts for sto­ring buil­ding mat­erial while cons­truc­ting a buil­ding

Capital

These are incurred for the cons­truction of building and hence to be capi­tali­zed with the cost of building

26.

Deposit with Maha­nagar Tele­­phone Nigam Ltd. for ins­talling tele­­phone.

Capital

The amount us ad­justed over a period of time aga­inst tele­­phone bills.

27.

Expen­ses for re­moval of stock to a new site

Revenue

Such ex­pen­diture in neither bring­ing enduring benefit nor en­hancing the value of capi­tal asset.

28.

Fines Imposed

Revenue

Such expen­diture is nei­ther bring­ing end­uring benefit nor en­han­cing the value of capital asset.

29.

Annual Fire Insu­­­rance Rs. 12,000 paid on 1st Janu­ary 2006 during acc­oun­­ting year end­­ing on 31.3.2006

Revenue

Rs. 3,000 as current year’s revenue ex­penses Rs. 9,000 as prepaid ex­penses for next year.

30.

Inaugu­ration Ex­pense on ope­­ning of a new branch of an exis­t­ing busi­­ness Free gift to cust­o­mers

Or

Tourna­­ment Spon­­soring Exp.

Or

Advertise­ment campa­ign to lunch a new pro­duct.

 

 

Deferred

Revenue

Such expen­diture is not enhancing val­ue of capital asset. Since it has an enduring effect on the future re­venue gene­rating ca­pab­ility of busi­ness, it may be trea­ted deferred revenue expenses.

31.

Compen­sation for breach of stock to a new site

Revenue

Such expen­diture in neither be­ne­fit nor en­hancing the value of capital as­set.

32.

Compen­sa­tion paid to wor­kers under Vol­un­tary Re­tire­ment Scheme (VRS)

Revenue

Such expen­diture is not enhancing value of ca­pital asset. Having re­garded to the large am­ount, it may be better to treat it as de­ferred re­venue ex­penditure which may be w/o of over future years.

33.

Amount spent on demo­li­tion of Building to con­s­truct  bigger buil­­ding on the same site

Capital

These are in­curred for the con­struction of new buil­ding

34.

Loss Sale of Machine

Revenue

Such ex­pen­diture is nei­ther brining end­uring bene­fit nor enhan­­cing the value of capital asset.

35.

Legal Ex­penses to recover dues from custo­mers

Revenue

These are in­curred to main­tain pre­sent revenue gene­­rating capa­­bility

36.

Festival Ad­vance to em­p­loyees

Not an Exp.

It is an item of loan & ad­vances

37.

Advance to Suppliers of Goods

Not an exp.

It is an item of loan & ad­vances.

38.

Cost of Im­­prove­ment in Electric wiring sys­tem

Capital

This is in­curred to acq­uire capi­tal asset.

39.

Purchase of a Patent Right

Capital

This is in­cur­red to acquire cap­ital asset.

40.

Purchase of a Good­will

Capital

This is in­cur­red to acquire cap­ital asset.

41.

Purchase of a Tech­nical Know how

Capital

This is inc­urred to ac­quire capital asset.

42.

Purchase of a Live Stock by a farmer

Capital

This is inc­urred to ac­quire capi­tal asset.

43.

Amount spent on Neon Sign Board

Capital

This is in­cur­red to ac­quire capital asset.

44.

Import Duty on pur­chase of Mate­rials

Revenue

This is in­cur­red on ope­rating act­­ivities in the normal course of bu­siness.

45.

Compen­sation paid to em­plo­yees who were retir­e­ched

Revenue

Such ex­pen­diture is nei­ther br­inging end­uring bene­fit nor en­han­cing the value of capital asset.

46.

Imported Goods for­feited by custom au­tho­rities

Revenue Loss

Such expen­diture is nei­ther brin­ging end­uring bene­fit nor enhan­cing the value of cap­ital asset.

 

 





Test Your Skills Now!
Take a Quiz now
Reviewer Name