treatment of trial run production

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susheel (Querist)
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05 April 2010 dear all

my query for you is

how should trial run production be treated if the same is
1 sold
2 unsold (i.e in stock)

Kindly suggest the tax implications of the same too.

Thank You.....Susheel

DEEPIKA GOEL

DEEPIKA GOEL (Expert)
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06 April 2010 Trial run production cost should be capitalised with the cost of plant and machinery from which the production was generated.

If those trial run production units are sold, the amount realised from the sale of above items should be deducted from the cost of plant and machinery and if unsold, nothing to be done after capitalising.

shakuntala chhangani

shakuntala chhangani (Expert)
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07 April 2010 Agreed with deepika. It is covered under AS 10 - Accounting for fixed assets.
Regards, CA Shakuntala Chhangani

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susheel

susheel (Querist)
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07 April 2010 Dear Experts firstly thanks for your prompt response.
In continuation of my query... What is the treatment if the trial production is sold in the subsequent year also in the current year will the same be considered for calculation of increase\decrease in stock to be shown in p&l account

susheel

susheel (Querist)
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shakuntala chhangani

shakuntala chhangani (Expert)
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08 April 2010 whenever the trial run production will be sold out, the sales proceeds will get credited to Asset A/c. The same has already been mentioned by Deepika.

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susheel

susheel (Querist)
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08 April 2010 Dear Madam

The latter part of the query is not answered i.e regarding consideration of the same in valuation of closing stock of the current year.

shakuntala chhangani

shakuntala chhangani (Expert)
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09 April 2010 cost of trial run production is debited to asset A/c n sales proceeds will also get credited to Asset A/c so there is no question of valuation of stock or its effect on P/L A/c In case u hv any further doubt, revert back to me.
Regards, CA Shakuntala Chhangani

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susheel

susheel (Querist)
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10 April 2010 Thank you Madam my problem is well explained

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