treatment of advance paid towards purchase of flats

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This query is : Resolved

sujanapal (Querist)

13 July 2008 How to show the following in the books of a company which had paid advance for purchase of Flats for its employees.

Advance given to a Developer for Purchase of flat.

Delivery after three years.
Advance, plus milestone payment involved.
The buyer has entered into an agreement.
We can not take the asset as the same is not complete.
There is a liability to pay the contract value.
Notes under capital contract not executed ??

Is it need any disclosure as required by AS-1

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)

14 July 2008 Only agreement has been executed and the ownership documents have not yet been executed. As such, the amount paid may be treated as Advance. As and when the title or the possession of the property is given the same may be transferred to Fixed Assets account.

sujanapal

sujanapal (Querist)

14 July 2008 Dear sir
thanks for reply. Since some penalty clause in the agreement where payment is defaulted, is it require any disclosure to notes on accounts as contingent liability?

thanks

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)

14 July 2008 No, it is not required.

sujanapal

sujanapal (Querist)

14 July 2008 thanks

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