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Accounting treatment

ankush sharma (Student CA Final ) (57 Points)

27 November 2015

SIR PLEASE GIVE ADVICE ON CONSTRUCTION OF A BUILDING ON OWN PLOT,AT WHICH YEAR WHOLE AMOUNT OF (PLOT+CONSTRUCTION COST OF BUILDING) SHOWN IN BALANCE SHEET AS AN ASSETS.

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3 Replies

ROSHAN PAUL JOSEPH (CA Final student) (311 Points)
Replied 27 November 2015

Land can be recognised on balance Sheet after the owner acquires the Legal Entitlement.

During the period when building is under construction, it is to be shown under Capital Work in Progress

ROSHAN PAUL JOSEPH (CA Final student) (311 Points)
Replied 27 November 2015

It is to be transferred from Capital WIP when the asset is complete and is ready to use.

Viral Patel (9 Points)
Replied 27 November 2015

As per accounting standard building and land both are sperate assets. Now question is to when to recognise both assets and how to recognise in balance sheet. In case of plot of land, it will be recognised in balance sheet as soon as alllegal proceeding to acquire that land is completed in almost all respect at cost of purchase plus stamp duty plus any other cost incurred to acquire that land I.g. commission of agent. Now coming to building, it will be recognised as soon as work has been started to construct building. However till the time of completion of this building, all expenses incurred on construction of building are to be recognised as building wip / capital wip. As soon as all the majority work of building to be ready to use are completed, it will be recognised as building by crediting building wip a/c / capital wip a/c. I hope that this may be enough to understand. Any query from your side will be appreciated. Rgds, Viral Patel