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A) A box file
B) A computer
C) A small plastic display stand
B is the answer becuase computer has useful life more than one year and required much more amont as compare to others.
This item will be Capitalized. B) A computer
Other two items being negligible in value and the life span of which is very short, it would be better to write off as Expense for the current year.[and can also avoid a lot of procedures that are generally followed for Fixed Assets]
It is all depend upon the value of an asset and its period of life / usage. The value of an asset which is less than US$1,000/- is not required to be capitalized based on the companies accounting policies and procedures.
This is according to the companies policies about the materiality . Some companies say the fixed asset must be more than $5000 .
answer B >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
b.a computer.......by the way it depends on nature of company...!for example...if a company deals in computers so computers are goods for company!not to capitalize as an asset!
Capitalization depends on the value as well as life of the subject items and the size of the company. For some large companies a plastic display stand of value say $1,500 is not material enough to be capitalized.
A box file shall be expense out as in stationery, immaterial amount + no cash conversion.
B computer shall be capitalized and depreciated on a suitable basis on tax or company policy.
C no cash conversion though but can be capitalized as a fixture( its upto policy and judgement )
GAAP defines a company's assets as the things it owns or controls that have measurable future economic value. If something does not fit that description, it cannot be capitalized. As per this guideline, I would include the item (C) 'A Computer' to be capitalized in the company's Balance Sheet.
Well computer shall be capitalised while other two items shall be classified as stationary/office supplies.
