02 May 2016
A company is engaged in the business of transmitting electric power. It has a network of power transmission grids and sub-stations for distributing power.across the couintry. Recently it has entered into the business of providing consultancy to other organizations especially State Electricity Distribution Companies for setting up of distribution network, subststions etc. Some of their clients have in the recent past requested them for testing transformer oil. The company is treating revenue earned on account of testing transformer oil as 'Income from consultancy' and is booking it into their profit centre "Consultancy". In this regard I have two queries: 1. Is the accounting treatment correct or should the Company book it as "Other income" in their profit centre "Transmission"? 2. Is a request made for testing other company's transformer oil a consultancy assignment?
02 May 2016
1 Not correct book it as other income in the profit centre Transmission. 2 It is not a consultancy assignment. It is an assignment of lab testing.
CAclubindia
