Trust accounts

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Anita (Querist)
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14 October 2011 The Trust does not have ownership of Land. It belongs to another trust. But the Trust has spent Lacs of Rupees on Consruction on that Land. Amount spent on construction over that land is shown as revenue expenditure.
My question is what is the duty of Chartered Accountant in such a case. How to acount for such expenditure.

CA Neha Jain

CA Neha Jain (Expert)
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18 October 2011 The structure made on the land should be capitalized over the period of the right to use the land as 'Leasehold Improvements' or 'Building' based on the type of structure.

If it is temporary in nature and will be demolished in near future (less than 12 months), it should be expensed out in the Income and Expenditure Account.

It is not clear from the query whether the trust has taken the land on lease from the other trust or the other trust has given the consent in writing to use the land.

Anita

Anita (Querist)
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25 October 2011 The land is not of the ownership of the Public trust and neither are their any fomal agreements for the usage of such land( Lease,Rent etc) My querry is that

1) In such a case can the trust spend money on such land for building & Construction?

2) What would be the duty of the CA to be made in the from of disclosures in this respect?

3) How is such expenditure to be shown in the books of Accounts ?

4) Is it the duty of the CA to verify the documents as to ownership of land on which monies are being spent on construction ?

5) What proof is required to be checked by the CA that the monies have actually been spent on Building & Construction on certain properties which are not of the ownership of the trust?

Please do the needful.