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M/ S” “X” IS A SOLE PROPRIETORY CONCERN WAS DOING THE BUSINESS OF JOB WORK OF KITCHEN INTERIOR AND M/S” Y” CO. DOING TRADING ACTIVITY FOR PURCHASING RAW MATERIALS (KITCHEN ITEMS) AND SOLD IT TO M/S X CO (M/S “Y” CO SOLD M/S.”X” CO ONLY AND “X” CO AND “Y” CO HAVE SEPARATE TIN NUMBER) FOR DOING THE JOB WORK AND ALSO “X” CO PURCHASING RAW MATERIALS DIRECTLY FROM OUSIDE SUPPLIERS. “X”CO AND “Y”CO CAN CONTROL UNDER THE SAME MANAGEMENT. M/S. X CO RECEIVED INCOME FROM CUSTOMERS ON THE FOLLOWING BASIS

BEFORE STARTING THE WORK – RECEIVED 50%

AFTER COMPLETING THE STRUCTURE – RECEIVED 30%

COMPLETION OF WORK – 20%

I HAVE SOME DOUBTS REGARDING SOME OF THE TRANSACTION THAT IS TO BE MENTIONED AS FOLLOWS (M/S.”X”)

AMOUNT (ADVANCE) RECEIVED FROM CUSTOMERS SHOULD BE GROUPED UNDER CURRENT ASSET OR CURRENT LIABILITY, IF IT IS TREATED AS CURRENT LIABILITY,AT THE END OF THE FINANCIAL YEAR THE WORK IS NOT COMPLETED WHAT TREATEMENT SHOULD BE MADE FOR THE BALANCE AMOUNT TO BE RECOVERED FROM CUSTOMER (EG. X ENTERED IN TO AN AGREEMENT RS. 100000/- FOR COMPLETING THE JOB WORK. MR.A MAKE 3 PAYMENTS RS.25000,25000,25000 RESPECTIVELY BALANCE OF PAYMENT TO BE RECOVERED FROM A AT THE END OF THE FINANCIAL YEAR IS RS.25000/- WHAT TREATEMENT SHOULD MADE FOR THIS 25000/-)
AFTER THE COMPLETION OF CONTRACT ( THE ABOVE MENTIONED EXAMPLE SHOULD TAKEN) THE TOTAL AMOUNT RECEIVED FROM PARTY IS TO BE REFLECTED IN P&L STATEMENT.IS THE WHOLE 100000/- IS TO BE TAKEN IN P&L AS SALE OR ICOME FROM JOB WORK.IF IT SHOULD BE TAKEN AS SALE ANY BILL SHOULD BE RAISED AGAINST PARTY? OR ANY OTHER TREATMENT IS TO BE MADE? WHAT TREATEMENT SHOULD MAKE FOR THIS BASED ON AS 7?
THE FOLLOWING ARE TO BE TREATED AS AN ASSET OR IT IS TO BE TREATED AS REPAIRS AND MAINTENANCE?

PRINTER
UPS
COMPUTER MONITOR ONLY
CAR AND BIKE (USED FOR BUSINESS PURPOSE ONLY)
LAPTOP PURCHASE FOR MANAGER
EPABX SYSTEM

WHAT TREATEMENT SHOLULD BE MADE FOR THE AMC AMOUNT FOR MACHINERIES INSTALLED FOR DOING THE JOB WORK, AIR CONDITION AND ANY ASSETS
VAT ON PURCHASES (M/S.X – JOB WORK) WAS NOT TAKEN ANY CREDIT ON INPUT VAT BECAUSE THEY FILED RETRURN ON COMPOUNDING EFFECT. IS VAT ON PURCHASE WILL BE TREATED AS EXPENSE OR CURRENT LIABILITY.
THE GROSS RECEIPT FROM JOB WORK IS ABOVE 10 LAKH WORKS CONTRACT ATTRACT SERVICE TAX ?
IN PRACTICAL SENSE WORK CERTIFIED AND WORK UNCERTIFIED, WORK IN PROGRESS RESERVE IS TO BE SHOWN IN ACCOUNTS

As per the details given you the revenue shud be recognized as per the completed contract method as enunciated in AS9- Revenue Recongnition.The 50% amount recd before starting the work and 30% amount recd after completion of the structure will be shown as advance recd from customers .The advances received are credited to the customers account. These will be shown as Trade Payables under current liabilities. Revenuw will be recognized to teh extent of 100% after receipt of money to the extent of 20% after completion of work & issuing the invoice to teh customer. TDS if any made by the creditor shud be shown as asset and adjusted in teh customers account.

all the items mentioned above would be treated as Fixed Assets and shud be capitalised accordingly & depreciation can be claimed on these.

As regards AMC for machineries, these shud be treated as revenue expenses & debited to the P&L account. However if they exceed the prescribed limits i.e. Rs 30000 in single payment or 75000 in aggregrate during the F.Y. then TDS needs to be made @ 1% if payment is made to indivudual or HUF or at @ 2% if pymt is made to partnership firm, company etc..provided that Tax Audit was applicable(sales shud be more than Rs 1crore) to M/S Xin the immediately preceeding year