Cost of item whether it is expressed aur capitalised will be depend on the following situations The cost will be taken as expense when it is in the recurring nature and it is limited to for a period but when the cost is incurred and it is for a long period and it is not in recurring nature then it should be capitalised so in this questions (A) bike from track and specialised - it should be capitalised because it is not in the recurring nature and it is fixed so it is capitalised further bikes are customised. ( B) Development cost of Lime bikes app for locating paying and returning bikes means it is expense which not enter on on after completing A period it is a fixed so it it is it should be capitalised also (C) salary and sales person who works to get a city to adopt limebike program program -it is expense because it is in the recurring nature and it is for the specified period or specified activity (D) Replacement tyres for the bike - it should be capitalised because it is not recurring nature the replacement of tyres is not on the daily basis but it is after a fixed period of time it has a durability for sometime (E) Routine bike maintenance in Chain lubrication break paid - it is a routine activities so it should be the classify as expense (F) electricity other utility in the Company administrative office - it is a expense because it is recurring in nature it is not permanent expense, 2 why the classification between the expense capital is required company can identify whether we are in a profit of whether we are in the loss and what items we and what are the expense what are the cost which we have incurred on the fixed or capital & what are the expenditure which we have incurred for office expense
Cost of item whether it is expressed aur capitalised will be depend on the following situations
The cost will be taken as expense when it is in the recurring nature and it is limited to for a period but when the cost is incurred and it is for a long period and it is not in recurring nature then it should be capitalised
so in this questions
(A) bike from track and specialised - it should be capitalised because it is not in the recurring nature and it is fixed so it is capitalised further bikes are customised.
( B) Development cost of Lime bikes app for locating paying and returning bikes means it is expense which not enter on on after completing A period it is a fixed so it it is it should be capitalised also
(C) salary and sales person who works to get a city to adopt limebike program program -it is expense because it is in the recurring nature and it is for the specified period or specified activity
(D) Replacement tyres for the bike - it should be capitalised because it is not recurring nature the replacement of tyres is not on the daily basis but it is after a fixed period of time it has a durability for sometime
(E) Routine bike maintenance in Chain lubrication break paid - it is a routine activities so it should be the classify as expense
(F) electricity other utility in the Company administrative office - it is a expense because it is recurring in nature it is not permanent expense,
2 why the classification between the expense capital is required
company can identify whether we are in a profit of whether we are in the loss and what items we and what are the expense what are the cost which we have incurred on the fixed or capital & what are the expenditure which we have incurred for office expense
Step by step
Solved in 3 steps
