MATERIAL CONSUMPTION FOR AS-7 CONTRACTS

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 June 2010 SIR I AM WORKING IN A PSU IN HYDERABAD. OUR COMPANY RECOGNISING REVENUE ON SOME CONTRATCS AS PER AS-7. THEY HAVE PROCURED RAW MATERIAL FOR A "SPECIFIC PROJECT FROM OUTSIDE INDIA. GOODS WERE RECEIVED IN HYDERABAD BY C&F AGENT ON 31ST MARCH 2010 AT NIGHT 10.30PM (IT HAPPENED REALLY). SO THE COMPANY HAS CONSIDERED THAT SINCE THE GOODS WERE PROCURED SPECIFICALLY FOR THE PROJECT, TAKEN INTO MATERIAL CONSUMPTION AND TO THAT EXTENT RECOGNISED REVENUE ON THE BASIS OF COST METHOD OF RECOGNISING REVENUE AS PER AS-7..

BUT THE AUDITOR OBJECTING THIS AND HE IS SAYING THAT THOSE MATERIALS WHICH ARE IN THE C&F AGENT WILL NOT FORM PART OF MATERIAL CONSUMPTION FOR THE YEAR 2009-10 AND THE REVENUE RECOGNISED SHOULD BE REVERSED..

KINDLY GIVE UR VALUEBLE SUGGESTION ON THIS ISSUE..

THANKING YOU

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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20 June 2010 My view your auditor is correct, Because even though the material purchased for a particular project,the mateiral is not yet received such as case the consumption cannot be booked, you can show as Goods or Material in trasnit

Also AS-7 percentage of revenue recognitation this may considered as committed cost for the project not for actually incurred

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