Forums
Capital vs Revenue Expenditure
Accountancy
answered on 07-Aug-25 10:01
Sir, how is the repair cost incase of accident example different from the eg given for change of petrol tank due to rust (replacing 12L tank with 12L)? In the petrol tank case, we considered this logic, if the expense would increase the future economic benefit for multiple accounting period, we would have considered the 12 L petrol tank as capital expense. We had removed the earlier logic of tank capacity going beyond 12 alone would be capital. Why can't we apply the same logic again here? Major repair cost due to accident, has resulted in future benefits getting lost and we are incurring the expense to get the future economic benefit (it can be revenue or cost or convivence). Hence, capital.
latest answer
That is a slightly advanced concept - you will understand in CA Inter/Final. If parts of an asset are replaced then the cost of existing part derecognised from books and the cost of new component is recognised as an asset. For e.g in case of an aircraft, seats may be replaced every 3-4 years. Engine would last for 20 years. So when seats are replaced, it would be derecognised from books and new seats are capitalised. The example could be presented slightly differently to ensure better clarity.
Vignesh Venkatesan
CA Final
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327
Deemed investment
Financial Reporting
answered on 04-Aug-25 11:44
1.Sir, In Scenario b, If the loan is repaid by the subsidiary to parent after 3 yrs, will the deemed investments of Rs. 2,48,685 continue as Investments in books of parent. 2.If yes, How and when it can be derecognised? 3.If the subsidiary records this as equity in thier books, will the parent eligible for dividend and increased shareholding or it will recorded as R&S
latest answer
got it sir
Hariharan Ravichandran
CA Final
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Q
Financial Reporting
answered on 06-Aug-25 10:40
Sir, but lessee is opting to not apply practical expedient of seperating lease and non lease component..so shouldn't we take only total contract value? [Video Time Stamp: 05:12]
latest answer
Applying practical expedient means - Not separating lease and non lease Not applying means - Separating lease and non lease.
SANSKRITI BADRI 2111339
CA Final
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1
213
Capital vs Revenue Expenditure
Accountancy
answered on 04-Aug-25 09:53
Sir, in bike example, the insurance cost is a recurring nature of expense and the benefit from this does not spread over multiple accounting period (may be a third party insurance would be spread over multiple accounting period) and is not a one time expense. Still, we are considering it as a capital expense because it is necessary to bring the asset for its intended use. To ride the bike insurance is mandatory. Here, there is a clash between two theories (Recurring nature Vs Purpose of acquiring the asset), how could we justify one theory over the other?
latest answer
Insurance will be expensed off over the validity of insurance. say for e.g. you need insurance for 3 years mandatorily. That is shown as an asset in balance sheet and expensed over three years.
Vignesh Venkatesan
CA Final
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1
311
Capital Vs Revenue Expenditure
Accountancy
answered on 04-Aug-25 09:55
Sir, why the horn repair is considered as revenue? Repairing the horn or changing the battery are not done regularly and are not an ongoing expenses like the service of bike (eg- engine oil change or changing the nut and bolts). Then why are we considering it as a revenue expense?
latest answer
Horn repair and battery changes are considered revenue expenses because they restore the vehicle to its original working condition and do not enhance its value, prolong its useful life, or increase its capacity. However if you consider the battery cost to be significant - for e.g in case of EV, then you will depreciate battery separately and rest of car separately. You will understand this in AS-10/Ind AS 16 - component depreciation. Once the battery useful life is over, the battery is derecognised and new battery is capitalised
Vignesh Venkatesan
CA Final
★ 5
1
270
Year 2
Financial Reporting
answered on 06-Aug-25 15:06
Sir, please correct me if my understanding is incorrect. In year 1 we do not have any unallocated losses. In year 2, we have a loss of 50000 for the preference shares and 200,000 total loss. Since the value of preference shares is 0 in the beginning of Year 2, we will reverse the loss booked in year 1. So, it will result in unallocated loss of 50,000 for year 1. And, in year 2, we have allocated 100,000 from the total loss to the Debt. Unallocated portion of loss is 1,00,000 in year 2. So the cumulative unallocated loss is 1,50,000. [Video Time Stamp: 12:21]
latest answer
We had to book Ind aS 109 loss. Since the value was 0, we reversed share of losses allocated to the exent of 50,000 in Year 2 and booked 109 loss. 1,00,000 is written off against loan. So net loss is 50,000. Balance 150,000 is unallocated
Abhijith K B
CA Final
★ 5
1
212
Business combination Illustration 19
Financial Reporting
answered on 10-Jan-26 19:40
It was taught in Ind AS 12 that DTL arising on initial recognition is not accounted but in the question we are reducing the amount both pre-existing as well as on PPE changing. Kindly explain the initial recognition which is not accounted for goodwill [Video Time Stamp: 22:48]
latest answer
Correct thinking. For tax purposes the WDV wont change for subsidiary.
Nivethithaa S
CA Final
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CARO clauses
Auditing
answered on 04-Aug-25 10:30
Is it necessary to write clause number for CARO questions in examination
latest answer
Thank you mam
Shankari C
CA Inter
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6
337
Accrual Concept and Matching Concept
Accountancy
answered on 06-Aug-25 11:23
Accrual Concept - For Expense - We need to record an expense, when the activity is completed and not when the payment is made. Is this true always sir to understand in simple terms? An income for one is expense for other, hence a person who would receive the income would record his income when it becomes receivable (right to receive) and the other person would record expense (as he needs to pay). Will always both party record at same time, a right to receive for one and right to pay for other occur same time always or can it be different? Matching Concept - Sir, what concept is used to identify the expenses which are required to earn the income for matching against the income. For eg - Certain expenses like rent, salary, electricity charges are always considered as expenses and certain expenses are added to inventory while calculating the value of unsold goods for a particular period and later when the goods are sold these are adjusted as expense. Why are we differentiating between expenses as one would directly be expense and other would go to asset and later use matching concept? As any company makes expenses to earn income, why can't we directly reduce the expense only when income is earned? [Video Time Stamp: 00:02]
latest answer
Your understanding is correct. Period expense is a term used to denote those expenses which are charged to PL in the period in which they are incurred. For example Advertisement expenditure.
Vignesh Venkatesan
CA Final
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425
About statutory updates
Direct Taxation
answered on 04-Aug-25 17:39
For January 2026 CA final exams finance act 2024 is applicable or finance act 2025 will come
latest answer
Ok sir thanks
Naveen Kumar
CA Final
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2
292