Accounting treatment of shis licence

CA.Saurabh Sharma (Qualified CA) (42 Points)

27 November 2015  

There is a listed textile company. It wants to purchase a SHIS licence from the market and it is available on the value of  60% of cost.

i.e.

 

Face value of SHIS Licence = Rs. 1,000/-

Purchase price of SHIS Licence = Rs. 600/-

Discount Received on purchase of licence = 400/-

 

Please specify the accounting treatment of such amount of discount.

Whether it should be shown as income in P/L account or to be shown as advance against assets under the head CWIP of Balance sheet.

And also specify the journal entries with respective amount for all treatment.