Accounting treatment of shis licence

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Qualified CA
42 Points Joined September 2011

There is a listed textile company. It wants to purchase a SHIS licence from the market and it is available on the value of  60% of cost.

i.e.

 

Face value of SHIS Licence = Rs. 1,000/-

Purchase price of SHIS Licence = Rs. 600/-

Discount Received on purchase of licence = 400/-

 

Please specify the accounting treatment of such amount of discount.

Whether it should be shown as income in P/L account or to be shown as advance against assets under the head CWIP of Balance sheet.

And also specify the journal entries with respective amount for all treatment.

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On 27 November 2015 at 18:16 Report
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CA - Final
1367 Points Joined September 2009
Generally firms show it as purchase since it is consumed as a cost during the course of import amd the license include VAT. Yes the disc is credited to P and L.. Dr SHIS (FV) Dr VAT Cr disc and Cr Bank account.
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On 30 November 2015 at 09:06
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CA - Final
1367 Points Joined September 2009
However, obtain an expert opinion
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On 30 November 2015 at 09:07
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Accountant
48 Points Joined January 2013

Entry Of SHIS Licence Purchase:-

SHIS Licence Purchase A/c. Dr.    Rs.1000

Input Vat 5% On Shis Liecence A/c. Dr.  Rs. 29  (Accessable Consideration Value Rs.571)

To Vendor Account  A/c Rs. 600

To Shis Profit & Loss A/c Rs. 429 

(Being Shis Licence Purchase @ 60% of Face Value with Vat and balance tranfered to P & L A/c)

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On 26 February 2016 at 18:39


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