earlier when there was a fixed assets of a value less than equal 5000, we used to charge 100% depreciation and finish it off in the FY itself.
but with the new companies act 2013 there is no such provision any more.
what will be the position in the new scenario.
According to the companies act 2013 all expenditure of the capital nature is capitalized in the books of accounts irrespective of the value and depreciation is admissible on that.
You have to charge the depreciation as per the companies act.
Also look forward for the Income tax's allowance of depreciation
Theoretically it is correct to say that now companies are required to depreciate assets below Rs. 5000 as per Schedule II of Companies Act 2013 (useful life of assets). However I am yet to see any company that has capitalised such assets during the first quarter of 2014. So in my view Company can stick to policy of charging 100% depreciation on such assets as they were following under schedule XIV of Companies Act 1956, considering that it will not have any material impact on financial statements.
I bought a stapler for my coaching class. it costed me Rs. 100.
i have been using it for last 4 years.
now is this a fixed asset?
i dont see this stapler going anywhere till my hair turn white.
so what shall i do ?
show it as fixed asset and depreciate it over 25 years at Rs. 4 per year.
thats how it seems in light of companies Act 2013
and what about the case where i am not a company and not bound by companies act anyway.
or shall i write it off in the year of purchase at 100% depreciation.
please throw some SUNlight on it.
As I mentioned in my response, I hadnt seen any company being capitalising assets less than Rs. 5000 even after Companies Act 2013 become applicable. So in my view you can depreciate such assets by charging 100% depreciation in year of purchase itself even when you are company. Since the amount of such assets are not material.
Ashish Tewani (CA Final Article at V.P. Mehta & Co.) (83 Points)
Replied 21 August 2014
Agreed with C.A. Mayur. I would also like to add something.
There is this so called Principle of Materiality in force. It says, if an expenditure seems of capital nature, but the amount of it is not material, then it can be charged wholly as an expense for the year of expenditure. So expenses such as purchase of calculator, stapler, pen, eraser, etc. shall be charged to P & L A/c wholly.
Is there any doubt that remains Ms. Shivani?
i agree al the above replies. shivani:) its simple we dont prepare f.stts 4 a petty shop and there is no need of huge amt to run petty shop. COMPANY is the person 4 wich capital is a pool of huge little amounts and carrying buisenes on a huge basis. your own home is different from d stapler or dustbin, both wil stay with you til ur hair becomes gray, but you cant live with shelter and your volume money matters and purpose also matters after money. while going thru subject just to assume you dealing wit
As ICDS also become effective know and there is not materilaty concept there and there is no limit of Rs 5000 in income tax. In such case assessing officer may disallow the such expense as the defination fixed asset say "Tangible fixed asset" is an asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business. In such case stapper calculator may be treated as fixed asset or we have to shown such item as statioanry items.
Can a Private Limited Company have a policy of not capitalising any expensiture below a threhhold limit say Rs.100,000. Is it permissable under the companies Act.
first of all i would like to say that its good to hear from you.
now, getting to business, companies were allowed to write off assets with a value of rs 5000 or less in the first year itself.
However, this is not the case with Companies Act 2013.
irrespective of the value of assets, you need to depreciate it as per the life of the asset as mentioned in schedule II of the companies act 2013.
But, from an auditor's point of view, 5000 is material.
so you can depreciate it 100% in the year of purchase itself or you can depreciate it as per the useful life of the asset.
Either ways, there wont be any queries during your stautory audit.
Also, if i may, i would like to get to know you better so that i can teach you more about the statues existing in this country.
look me up on insta if you like. username : akash_tt. (FB is old fashioned)
Have a great day, cheers!