Question

The expenditure incurred for installation & freight of asset are ____________.

• A. Cost of asset
• B. Expenses
• C. Loss on asset
• D. All of the above

Answer 1

The correct option is A Cost of asset

Cost of asset

Expenditure incurred upto the date at which the asset becomes ready to commence commercial production ( i.e. production intended for sale or capitative consumption) should be capitalized and expenditure incurred after this cut off date should be treated as revenue expenditure. Examples of such expenses to be capitalized include :

1. Freight & in- transit Insurance
2. Import duties and other non refundable taxes
3. Cartage and Carriage Expenses
4. Site preparation cost
5. Installation cost
6. Professional fees for Architects and engineers
7. Expenditure incurred on test runs and experimental production
8. Borrowing cost incurred upto the date at which substantially all the activities necessary to prepare the qualifying asset for its intended use are complete.