% of Work Completion & Sales as per AS-7

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 May 2010 Dear Experts,

I am working for real estate Company developing a residential project. We have just completed our Books for F.Y.09-10 and it was my 1st experience to use AS-7 method. While calculating sales & cost of sales for the project we have applied AS-7 as per construction Accounting standard. As per books of accounts we have found the % of work completion which is 57%. Simply if we have to find out the sales and Cost of Sale then we calculate Sales and Cost of Sales for the F.Y 09-10.
As Per AS-7
(1) Sales for F.Y 09-10 = Total Sales * % of Work completion – Last year‘s Sales.
And for
(2) Cost of Sales for F.Y 09-10 = Total Cost incurred * % of work Completion – Last
Year’s Cost of Sales

But company has adopted a new mythology for calculating cost of Sales for the
Project for the F.Y 09-10 they have calculated Cost of Sales as per below method. This mythology might be right but I am not aware for the same. Please give me detail explanation why we calculate the Cost of Sales as per below method or any other method which is in knowledge of experts or if experts want to share with me so I can be an experts also.

As Per Company‘s methodology
Cost of Sales = Total Cost incurred * % of total Area Sold – Last Year’s Cost of Sales

Which one method is right for calculating Cost of Sales and Sales as per AS-7?
Please Guide Me.

Thanks & Regards
Ravinder