Question

Whether installation, freight and transport expenses will be added to the cost of the asset or treated as revenue expenses?

Answer 1

It is very clear from the concepts of accounting that all the incidental expenses incurred to procure any assets should be added to the cost of assets. More simply, till the plant gets installed and operational, all such expenses to be added to the acquisition cost.

For example, a machine is purchased for Rs.80000. Transportation charges for bringing the machine to the installation place is Rs.10000, cost of installation is Rs.5000 and other misc charges are Rs.5000.

In the above example, acquisition cost of machine would be Rs.80000+Rs.10000+Rs.5000+Rs.5000.