Printers are given to the customers without any charge for a period of 3 years . However cartridges are sold to the cutsomer and the customer is charge on printing of per page basis. At the end of 3 years contract, the printer is either returned by the customer or purchased by the customer at a mutaully agreed price.
The following question arises :
1. Whether printers are to be treated as fixed assets or as stock in trade - Fixed assets since these printers are machinery which is used by the customer and which is generating revenue for me in terms of use per paper basis. It can be treated as Inventory since the customer might purchase printer after 3 years and without giving printer it is not possible for me to earn revenue per paper from sale of cartridge
2. If the printer is purchased by the customer after 3 years, will the transaction be treated as a leasing business.
regards
Falgun
CAclubindia
