04 January 2024
B ltd (aluminium manufacturer) is going to erect a plant. It is planning to outsource entire erection and commissioning work to ABC pvt ltd with following terms & conditions
1. entire expenses of erection and commissioning to be borne by ABC pvt ltd 2. B ltd will not pay any amount untill plant is ready for operation 3. After plant is ready for operation B ltd will pay ABC Pvt ltd 20 lacs every month for 12 month 4. After 12 months entire rights pertaining to assets to be transferred to B Ltd
My Query ? 1. what will be the accounting treatment of erection and commissioning expenses in the books of ABC pvt ltd - i.e Fixed assets or stock ? 2. How revenue 20 lacs every month will be booked after plant is ready for operation ? 3. when and how assets should be transferred by ABC pvt ltd to B ltd. 4. At what price asset will be recorded in the books and From which date B ltd will be able to claim depreciation ?
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