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.

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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27 September 2011 Land is to be shown under purchase and it is a part of stock not of fixed asset

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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27 September 2011 Construction of building on land is not any Investment

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CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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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

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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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

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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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

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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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