Illustration 67. A Ltd. has undertaken a project for expansion of capacity as per the following details (all figures in rupees): Plan Actual 2,00,000 3,00,000 April May June July August September 2013 2013 2013 2013 2013 2013 Z 2,00,000 2,00,000 10,00,000 1,00,000 2,00,000 5,00,000 1,00,000 7,00.000 The company pays to its bankers @ 12% p.a. interest being debited on a monthly basis. During the half- year the company had 10 lakhs overdraft up to 31st July, surplus cash in August as against overdraft of over 10 lakhs from 1.9.2013. The company had a strike during June and, hence, could not continue the work during June. Work was again commenced on 1st July and all the works were completed on 30th September. Assume that expenditures were incurred on 1st day of each month. Calculate: (i) Interest to be capitalised; and (ii) Give reasons whenever necessary. Assume: (a) Overdraft will be less if there is no capital expenditure: (b) The Board of Directors, based on the facts and circumstances of the case, has decided that any capital expenditure taking more than 3 months as substantial period of time. FINANCIAL ACCOUNTING I 2.59