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Why do capital expenditures increase assets (PP&E), while other cash outflows, do not create any asset?

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Question ajoutée par Karmel Hammad , Junior Civil Engineer , Khatib & Alami
Date de publication: 2017/08/30
vijay choudhary
par vijay choudhary , Associate analyst , Wipro ltd

Accruals concept in accounting requires that expenses shall be recognised when they are incurred whether they are paid or not. Following accrual based accounting, those expenses/expenditures are charged to IS which are incurred in the reporting period and the rest is capitalized. In later periods capitalised items are charged to IS of relevant period by depreciating/amortising them. However, carried values of those capitalised items are subject to fair valuation and, hence, revaluation and impairment obliged the accrual concept.

Soliman Abd  ALmalak Gendy
par Soliman Abd ALmalak Gendy , مدير ادارة مراقبة حسابات , الجهاز المركزى للمحاسبات

Expenditure on assets and expenses both reduce cash. -Expenditure becomes expense when the required benefit is taken of and is is of no more use to firm

Mohammad Rafiquzzaman Khandaker
par Mohammad Rafiquzzaman Khandaker , Assistant Manager - (Treasury & Import Payable) , RAK CERAMICS (BANGLADESH) LIMITED

If any incured expenses enchance the performance of asset then the said expenditure increses the asset's carrying value. On the other hand, the expeses incured for the maintain the asset/continuing the performance which not improve the performance of the asset, that will be charge to P/L.

mohamed abdelaty
par mohamed abdelaty , محاسب مالى , جولدن ايجل فودز

Expenditures on capital assets that improve the asset’s performance or extend its useful life are capitalized as part of the asset’s cost. Accordingly, the building repairs are capitalized. The substitution of a better computer system is classified as an improvement, and the costs also should be capitalized. Moreover, the entity capitalizes the costs of a rearrangement of the configurations of the offices and open work spaces that (1) requires material outlays, (2) is separable from recurring expenses, and (3) provides probable future benefits. However, expenditures that merely maintain the asset at an acceptable level of productivity are expensed as they are incurred. Thus, the costs of painting the building are routine, minor outlays that should be expensed immediately.   

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