Renovation work in leased land

A/c entries 425 views 2 replies

Sabarinath P

3 Points Posted on 14 October 2024

Dear Sir,

Our company engaged in contract work for this purpose we need manpower,equipement,stock yard etc. for fulfill this need we leased 40000 sq meter land includes two old buildings for 3 years . (in this building we are planning to accomodate site staffs and labours) these building need repair work for this case we are purchasing materials like- cement ,sand , plumbing items , electricals items , wall tiles, paints etc .

as per lease agreement total lease amount rs 18,00,000/- for 3 years

mutually agreed payment terms -6 Lacs for each year

My questions are

How i treat this transactions ?
Purchase of builindg repair items accounting
Purchase of capital items for this builinding accounting

Thanks

Sabarinath

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9615 Points Posted on 14 October 2024

You have a lease agreement with a total lease amount of ₹18,00,000 for 3 years, with mutually agreed payment terms of ₹6 Lacs per year. You're wondering how to treat these transactions in your accounting records. Here's a suggested approach: 1. *Lease Payments*: - Treat the lease payments (₹6 Lacs per year) as *Rent Expenses* in your Profit & Loss Account (Income Statement). - Record the payments as they are made, using the following entry: - Debit: Rent Expenses (₹6,00,000) - Credit: Bank/Cash (₹6,00,000) 2. *Building Repair Items*: - Treat the purchase of building repair items as *Revenue Expenditure*. - Record the purchase as an expense in your Profit & Loss Account (Income Statement). - Use the following entry: - Debit: Repairs & Maintenance Expenses (₹XXXX) - Credit: Bank/Cash (₹XXXX) 3. *Capital Items*: - Treat the purchase of capital items for the building as *Capital Expenditure*. - Record the purchase as an asset in your Balance Sheet. - Use the following entry: - Debit: Assets (₹XXXX) - Credit: Bank/Cash !