Asset capitalisation

AS 616 views 1 replies

Case : X Ltd is Indian company having a foreign client Y Plc.  For purpose of certain project , Y Plc instructed X Ltd to purchase certain asset in India and entire cost is reimbursed to X ltd . Assets are deployed in X ltd office but entire control over rest on Y ltd. X ltd is only resposible for maintenance & safe guard of asset .

Question : Will this asset be capitalised in books of indian company X Ltd as entire cost of asset is reimbursed by Y PLC ??if yes, what will be accounting treatment for reimbursed amount ??     

Replies (1)

Nope,, Asset will not be capitalized in the books of X ltd.,,

Journal entry-

Y plc. A/c                      Dr.             xxxxxx

     To cash/bank A/c                               xxxxx

then,

Cash/Bank A/c           Dr.            xxxxxx

      To Y plc.                                             xxxxxx

Also,,,There is a term u may like to check upon.... ""Turn-key Projects""

Answer may differ depending on what kind of work X ltd doing....


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