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Capital and Revenue

If a petrol car is replaced with diesel engine for better economies. Let us say, Cost of petrol car = 5,00,000 Cost of diesel engine = 2,00,000 Now as usual we capitalise the cost of diesel engine to the car But if we sell the petrol engine which is removed the proceeds of such petrol engine how should we account for?? Whether it should be reduced from cost of diesel engine ?? Or The proceeds of petrol engine is recognised in p&l a/c as non-operating revenue?? Please clarify this for me...


VIJAYA SARADHI MAGANTI

VIJAYA SARADHI MAGANTI

CA Foundation

850

25-Aug-20 15:21

43

Answers (5)

Best Answer

The proceeds of petrol engine is recognized in P&L A/c as non-operating revenue received on sale of an old engine. Purchasing a replacement engine for a vehicle is an asset improvement or capital expenditure. So it should be capitalized.


Madhuri Veluri

Madhuri Veluri

CA Inter

2K+

25-Aug-20 23:28

Mam!! How should we understand the point in the image below please clarify mam...

Attachments

IMG-20200825-WA0000~2.jpeg


Thread Starter

VIJAYA SARADHI MAGANTI

VIJAYA SARADHI MAGANTI

CA Foundation

850

26-Aug-20 01:58

The statement is incorrect. Old typewriter will be derecognized and new one will be fully taken as capital expenditure.


Madhuri Veluri

Madhuri Veluri

CA Inter

2K+

26-Aug-20 12:32

Madhuri Veluri

The statement is incorrect. Old typewriter will be derecognized and new one will be fully taken as capital expenditure.

Ok, thank you mam!!!


Thread Starter

VIJAYA SARADHI MAGANTI

VIJAYA SARADHI MAGANTI

CA Foundation

850

26-Aug-20 14:00

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