Accounting method
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
25 August 2011
Dear Expert,
Our firm is in construction line of business. We purchases a land and construct it and sell the flats.
Land so purchased is tobe shown under purchases or Fixed Assets.
Land so purchased is constructed within a period of around 2 years.
If we shown it as a Investment, then after construction of building will it amount to conversion of capital asset into stock in trade? and capital gain will arise
OR
If we shown a land as fixed Assets then also capital gain will arise.
If We will Show it as a purchases then no capital gain will arise at the time of sale of flats.
Which method is correct? Plz guide me. I am confused.
Our firm is in construction line of business. We purchases a land and construct it and sell the flats.
Land so purchased is tobe shown under purchases or Fixed Assets.
Land so purchased is constructed within a period of around 2 years.
If we shown it as a Investment, then after construction of building will it amount to conversion of capital asset into stock in trade? and capital gain will arise
OR
If we shown a land as fixed Assets then also capital gain will arise.
If We will Show it as a purchases then no capital gain will arise at the time of sale of flats.
Which method is correct? Plz guide me. I am confused.
27 September 2011
Land is to be shown under purchase and it is a part of stock not of fixed asset
27 September 2011
Construction of building on land is not any Investment
27 September 2011
The amount which have been incurred on building the flats which are incomplete and the construction process is still on are required to be shown under Work - in - Progress i.e. WIP
27 September 2011
The flats which got completed shoul;d be classified under Finished goods and it is part of ur Inventory as also the WIP is ur Inventory
27 September 2011
No, in any case on sale of constructed buildings would not form part of capital gain. It's income from business and profits
27 September 2011
The question of the Cpital gains arises only when you are selling any fixed assets of yours not ur inventroy
Flats for u are inventory
Flats for u are inventory
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