Question

Installation charges incurred on a fixed asset are included in its cost.

• A. True
• B. False

Answer 1

The correct option is A True

All the incidental expenses incurred towards purchase of any assets till the installation are to be capitalized and added to the cost of assets.

For example, if a machine is purchased from Mumbai for Rs,50000 which need to be installed at plant in Bangluru. Transportation charges of Rs.5000 incurred for moving the machine from Mumbai to Bangluru. Installation charges incurred Rs.5000.

Total Cost of assets will be:

Purchase Price Rs.50000

Transportation Rs. 5000

Installation Rs. 5000

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Total Rs.60000

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