Fixed Assets Question:
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Explain how to determine whether an expense is an asset or not? When you receive an invoice that shows that the company has purchased a tool or something, what makes you think this thing is an asset or its an expense. Is it the price of it or what?
Answer:
The expenses can only be capitalised in the following circumstances:
1. It must be related with the asset.
2. It must be essential to make the asset in working condition.
3. It must be above the capitalisation limit as per the prescribed policies.
1. It must be related with the asset.
2. It must be essential to make the asset in working condition.
3. It must be above the capitalisation limit as per the prescribed policies.
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