2. Mehra & Sons purchased a second hand light motor Vehicle at a cost of Rs 2 lacs. Additionally, various accessories costing Rs50000 were also purchased along with the Vehicles which are required to be replaced on a yearly basis.
Mr. Mehra wants to write off the overall outflow in Income statement
Discuss, whether he is correct or not? Discuss the need to differentiate between the capital and revenue items? How these items are to be treated in the financials of the company? Give reasons supporting the same
Answers
Explanation:
This is important to differentiate between capital and income spending if investments are cancelled. For the same year, tax costs are offset against sales.
Over the projected working lives, capital spending is determined. In this situation, however, the second hand light motor vehicle would be a capital expense which can not be cancelled entirely next year but which may be offset for sales in this year by other components, which are supplemented on an annual basis.
When short, the car is viewed as a capital expense because the gain increases over the duration, although it may be discounted in the case of modifications in the same year.
No, Mr Mehra doesn't want to write down the whole income statement outflow.
Learn more about capital expenditure:
Explain the capital expenditure?
https://brainly.in/question/10336205
Give one example of capital expenditure and revenue expenditure ?
https://brainly.in/question/2420226