A newly set up Private Limited Manufacturing Company has incurred following expenditures for the acquisition of Plant and Machinery. The Company…

CA Intermediate · Advanced Accounting · RTP · September 2026
A newly set up Private Limited Manufacturing Company has incurred following expenditures for the acquisition of Plant and Machinery. The Company intends to capitalize these expenses. Is the Company justified? State with reasons. (1) Foreign Tour Expenses of Directors for purchasing Plant and Machinery. (2) Technical Staff's Salary during the period of installation of Plant and Machinery. (3) Non-Technical Staff's Salary during the period of installation of Plant and Machinery. (4) Other Sundry Expenses such as Stationery, Printing, Postage, Telephone, and Local Conveyance, etc.

Suggested Answer and Working Notes:

As per AS 10, costs incurred to bring the asset to the location and condition necessary for it to be capable to be operated in the manner as intended by the management can be added to the cost of PPE. Other costs which are not directly attributable to the PPE are to be recognized in P&L. Sr. No. Particulars Treatment (1) Foreign Tour Expenses of Directors for purchase of Plant and Machinery Capitalize (2) Technical Staff Salary for erection of Plant and Machinery Capitalize (3) Salary of Non-Technical Staff P&L (4) Administration and Other General Overhead Costs P&L

Topics: AS 10

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