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Capital and revenue expenditures
Accountancy
In the ICAI study material the amount paid to bring the inventory to current place is treated as revenue expenditure. But we have studied that the expenses incurred to bring the inventory to current place and position should be added to the cost of inventory so it goes to the Balance sheet. Kindly explain the confusion.thankyou.
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Best Answer
Sriram Somayajula Admin
Expenses incurred for bringing inventory to a location in respect of inventory that is consumed are charged to P&L as revenue expenditure. Such expenditure in respect of Inventory that is Closing stock is added to the value of the closing stock - Closing stock is a Current Asset and hence is shown in the balance sheet on the Assets side. You will learn more about it in Accounting standards on inventories in CA Inter
Actually y one small correction Expenses incurred for bringing inventory to a location in respect of inventory that is consumed AND SOLD are charged to P&L as revenue expenditure. Such expenditure in respect of Inventory that is Closing stock is added to the value of the closing stock - Closing stock is a Current Asset and hence is shown in the balance sheet on the Assets side. You will learn more about it in Accounting standards on inventories in CA Inter
Expenses incurred for bringing inventory to a location in respect of inventory that is consumed are charged to P&L as revenue expenditure. Such expenditure in respect of Inventory that is Closing stock is added to the value of the closing stock - Closing stock is a Current Asset and hence is shown in the balance sheet on the Assets side. You will learn more about it in Accounting standards on inventories in CA Inter
Sriram Somayajula Admin
Actually y one small correction Expenses incurred for bringing inventory to a location in respect of inventory that is consumed AND SOLD are charged to P&L as revenue expenditure. Such expenditure in respect of Inventory that is Closing stock is added to the value of the closing stock - Closing stock is a Current Asset and hence is shown in the balance sheet on the Assets side. You will learn more about it in Accounting standards on inventories in CA Inter
Thankyou so much sir. Feeling so happy i got such great passionate teachers like you.
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