Project Accounting

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Guest

Guest (Querist)

14 April 2011 Suppose a company (X&co.)gets a government project for education in the whole sector of schools in the a particular state. The project is of 3-4 years. There is capital expenditure and revenue expenditure in the project. Capital expenditure - purchase of computers, printers etc. for the school.

Query - This computers etc. (capital expenditure) purchased. What will be the entry passed in the books of company (X&co.).

Option 1) will it be treated as Fixed Assets and depreciation claimed for the three - four years (life of project). And then when the whole project is over, will it be taken as purchases(trading a/c.)?

or Option 2) Will it be treated the whole as purchases (project exps.) (trading a/c.) i.e. Project exps. a/c debited and Work-in-Progress a/c credited.

Kindly please answer. Also please give reference to the Accounting standard or Guidance Note.

Maninder Jain

Maninder Jain (Expert)

15 April 2011 Since the benefit of compuers, chairs, table will extend beyonf one year, i suggest you to capitalise the capital expenditure & claim depreciation benefit on it.

Later when the project is over, the assets can be sold & differnce in WDV & sale price can be treated as profit/loss in books.

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