Generally replacement cost is regarded as revenue expenditure. I have a doubt in this regard, If an asset is purchased having life of 5 yrs and after using it for 3yrs replacing total asset with similar kind of asset, whether it turns to revenue or capital expenditure?? How the journal entries are made in the books?? Can anyone please help me out of this doubt!!!
Replacement cost of the asset purchased is to be capitalised in the books of accounts as it is New asset
Then in which case replacement cost considered as revenue expense