Vineet Agarwal (Chartered Accountant) (87 Points)
10 November 2011Query:
A Real Estate Company has acquired certain land and started working on that land.My question is what should be the accounting treatment of Land and the Cost that has been incurred on land till the date the projects gets completed?
CAn anyone help me in this regard?pleas support yr answer with certain supportings?if possible ?
prasad
(CA Final Bcom(Taxation) Sr Audit Team Leader )
(71 Points)
Replied 10 November 2011
Purchase of land and development cost shoulb be shown as direct cost.If nothing is sold at year end
then the same should be considered as Closing stock after considering AS 2
Vineet Agarwal
(Chartered Accountant)
(87 Points)
Replied 10 November 2011
The projects gets completed after 4 years
Whether shuld i show the land cost and development cost under Capital/Construction work in progress
prasad
(CA Final Bcom(Taxation) Sr Audit Team Leader )
(71 Points)
Replied 10 November 2011
If the project is of type that after completion of project ,everything will be sold out and it is your main business then it should be shown as Direct cost (Revenue Exp) ,but not Capital WIP(Capital EXP),Since it is a good/stock to the company
If the Project is Apartment /Commercial Building and the objective of the business is to rent the same after completion of project ,then the said exp is of Capital Nature(Asset to Company) and same should be shown as Capital WIP
Vineet Agarwal
(Chartered Accountant)
(87 Points)
Replied 10 November 2011
Thanks Mr.Prasad.
yes thats the main business as it is a real estate company.
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