Inventory issued to Contractors for execution of Capital Projects

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This discussion explores the appropriate accounting treatment when a company issues inventory to contractors for capital projects. The current method debits 'CWIP-Stock' upon issue. Alternatives discussed include booking it as 'Advance to Contractors'. For free issues, debiting CWIP and later crediting it while debiting capital goods in stock at year-end is suggested. For recoverable issues, debiting the advance is proposed.

Kalpana Penmetcha

Kalpana Penmetcha (Querist)
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01 September 2021 Our Company issues Inventory Items to Contractors for execution of Capital Projects.
What should be the accounting treatment. Currently it is transferred to 'CWIP-Stock' on issue.
Is it correct to book it as 'Advance to Contractors'.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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01 September 2021 In case of free issue debit to CWIP and at the year end take the stock and credit CWIP and debit capital goods in stock.
In case of recoverable issue debit advance.

Kalpana Penmetcha

Kalpana Penmetcha (Querist)
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07 September 2021 Thank you very much sir

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