Treatment of compound wall built by a co. in its own land

This query is : Resolved

akhil joseph (Querist)
Follow

20 April 2012 Sir,
A compound wall constructed by a company in its own land and shown seperately in the books as compound wall and capitalized the same.
Can i direct them to add the expenses incured for the construction of compound wall to the cost of land?

CA Kishore Tallam

CA Kishore Tallam (Expert)
Follow

20 April 2012 It cannot be capitalised to cost of land.

akhil joseph

akhil joseph (Querist)
Follow

23 April 2012 then what should i do with that?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

02 August 2025 Here’s the clear treatment for the compound wall built on company’s own land:

### 1. **Compound Wall: Capital Asset Separate from Land**

* **Land is a non-depreciable asset**.
* A **compound wall is a tangible fixed asset** (a building/structure) constructed on the land.
* The cost of constructing the compound wall **cannot be added to the cost of land** because:

* Land is considered **non-depreciable**.
* Compound wall has **a limited useful life** and **is depreciable**.

### 2. **Accounting Treatment**

* **Capitalize the compound wall as a separate fixed asset** under "Building" or "Structures" or create a separate fixed asset head like "Compound Wall".
* **Depreciate the compound wall** over its useful life as per applicable accounting standards (AS-10 or Ind AS 16).
* Land remains as land, without depreciation.

### 3. **Why Not Add to Land Cost?**

* Land value remains fixed in accounting.
* Adding construction expenses (which depreciate) to land (non-depreciable) would distort asset valuation.
* Accounting standards and best practices require such structures to be separately accounted.

---

### Summary:

* **Do NOT add compound wall cost to land.**
* **Capitalize compound wall separately as a fixed asset.**
* **Depreciate compound wall over its useful life.**

If you want, I can help you draft the journal entries for this treatment. Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

siddhesh satardekar

santhosh singireddy

madhu sudan

RAJENDRA PARAKHI

kavita goel

Subscribe Now

Treatment of compound wall built by a co. in its own land

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA