Treatment of crockery in motels business
This query is : Resolved
04 July 2012
whether crockery is to be treated as stock or fixed asset in a motel business. plz also give any supporting judgement for the same.
06 July 2012
Question
A restaurant maintains a base stock inventory of silverware and dishes in an unchanging amount. Additions to the stock are charged to expense. On average, the turnover of these items is two years. Is it appropriate to classify the dishes and silverware as property, plant and equipment?
Answer
Yes. They are tangible assets held for use in the supply of goods and services and are expected to be used for more than one period. They should not be included in current assets.
------------------------
Check the below link for an expert opinion on the subject in point 1.9 of the document. Though it is from Pakistan, but is in line with guidance available under IFRS.
https://www.icap.org.pk/userfiles/file/TechnicalDepart/SelectedOpinionXIV.pdf
----------------------------
Indian example:
Bharat Hotels (Accounting Policy)
Inventories:
Stores and spares inventory of the Company comprises cutlery, crockery, linen, other store items food and beverage, liquor and wine items in hand, which are valued at lower of cost or net realizable value. Cost
is determined on First in first out basis. Circulating stock of crockery and cutlery is charged to the profit and loss account as consumption.
Unserviceable / damaged / discarded stocks and shortages observed at the time of physical verification are charged off to Profit & Loss Account.
Net realizable value is the estimated selling price in the ordinary course of the business, less estimated costs necessary to make the sale.
Inventory of food and beverage items in hand include items used for staff cafeteria and is charged to consumption, net of recoveries, when issued.
----------------------------
I would go with Fixed asset precedences as it does not satisfy the conditions of Inventory. ie it is not for sale. It matches more with teh definition of Plant.
Sanjay Chauhan
A restaurant maintains a base stock inventory of silverware and dishes in an unchanging amount. Additions to the stock are charged to expense. On average, the turnover of these items is two years. Is it appropriate to classify the dishes and silverware as property, plant and equipment?
Answer
Yes. They are tangible assets held for use in the supply of goods and services and are expected to be used for more than one period. They should not be included in current assets.
------------------------
Check the below link for an expert opinion on the subject in point 1.9 of the document. Though it is from Pakistan, but is in line with guidance available under IFRS.
https://www.icap.org.pk/userfiles/file/TechnicalDepart/SelectedOpinionXIV.pdf
----------------------------
Indian example:
Bharat Hotels (Accounting Policy)
Inventories:
Stores and spares inventory of the Company comprises cutlery, crockery, linen, other store items food and beverage, liquor and wine items in hand, which are valued at lower of cost or net realizable value. Cost
is determined on First in first out basis. Circulating stock of crockery and cutlery is charged to the profit and loss account as consumption.
Unserviceable / damaged / discarded stocks and shortages observed at the time of physical verification are charged off to Profit & Loss Account.
Net realizable value is the estimated selling price in the ordinary course of the business, less estimated costs necessary to make the sale.
Inventory of food and beverage items in hand include items used for staff cafeteria and is charged to consumption, net of recoveries, when issued.
----------------------------
I would go with Fixed asset precedences as it does not satisfy the conditions of Inventory. ie it is not for sale. It matches more with teh definition of Plant.
Sanjay Chauhan
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- About TDS & Income Tax
- PPF interest-As Exempt Income disclosure
- Scrutiny and reopening of past returns
- Tax on Deemed Capital Gain
- Section 194JA & JB Income which ITR Form to use
- Pass word to open justification report for Q1 for FY 2026-27
- Type of Capital Gain
- Regarding ITR filing with more value than showing in AIS/TIS
- F & O PROFIT REPORTING FOR AY 2026-27
- Booth for sales promotion
- Difff in ais receipts and gst turnover
- ITR-3 File/Error Found
- Exiting partner in partnership firm in gst portal
- Taxability of credit in canara bank ET & T section (NRO)
- Consequences of Non-Deduction of TDS under Income Tax???????????????
- TDS on Rent received on redevelopment of building
- Indian IT Portal issue in computing tax as per UK-India DTAA
- Capital Gains on sale of residential flat
- Upload Level ValidationITR3Category of Defect B/D
- PF Taxable Income
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
