30 July 2011
I am narendra doing my third year articleship in a firm... In one of my company which iam auditing, the company have started a new line of business for which the construction has started in the same factory.For that business they have ordered a machine.As at March 31, 2011 the machine has not entered the company premises but the company based on a completion certificate from the vendor have taken the cost of machinery into CWIP. I am not satisfied saying the asset has to be taken into books only when it entered the premises and is not when it is with vendor and not on the based on the completion certificate at the vendors premise.I argue that it should be taken only when GRN for the machinery is raised. For taking into books they passed the following entry: CWIP ...Dr to Vendor A/c
Kindly suggest me whether my arguement with the client is right or is there any other option for treating the same.
02 August 2011
The machinery can be taken into books of accounts before its arrival. But care has to be taken that the depreciation is not charged untill it is in ready to use condition.
CAclubindia
