19 July 2010
I have read a balace sheet of a pvt. ltd co.
Detail of Company:- currently there is no production and the construcation of plant is going on so not having any income.
The auditor prepare only balance sheet and there is no profit and loss account so is there any clause that no need of any P&L account for the company who's construcation of plant going on?\
another thing is there as per as-10 pre operative exp. are capitalised so these are which type of exp? can i have some example?
antoher thing is there auditor is also captilised the exp related to audit and othe so is it correct?
earlier ther is a guidance note on the expenditure during the construction period, which allows an entity exempted from being preparing a profit and loss account.
however the said guidance note has been withdrawn and is silent about the treatment of the pre-operative expenses, or expenditure during the construction period.
Hence Experts Advisory Committee of ICAI has given an opinion to prepare the profit and loss account in accordance with the provisions of the companies act.
Keep in mind that the profit and loss account should only show the income and expenditure not allocable to the capital work as per the terms of the AS - 10.
Hence the profit and loss account must be drawn, and general and common expenses not allocable to the capital asset should be charged in the year in which they are incurred.
In case the company is preparing for the first time the profit and loss account since its inception, the entire accumulated such expenses should be charged off to the profit and loss account in the year of prepartion of the profit and loss account.
CAclubindia
