Project Accounting

This query is : Resolved

Guest

Guest (Querist)

14 April 2011 Suppose a company (X&co.)gets a government project for education in the whole sector of schools in the a particular state. The project is of 3-4 years. There is capital expenditure and revenue expenditure in the project. Capital expenditure - purchase of computers, printers etc. for the school.

Query - This computers etc. (capital expenditure) purchased. What will be the entry passed in the books of company (X&co.).

Option 1) will it be treated as Fixed Assets and depreciation claimed for the three - four years (life of project). And then when the whole project is over, will it be taken as purchases(trading a/c.)?

or Option 2) Will it be treated the whole as purchases (project exps.) (trading a/c.) i.e. Project exps. a/c debited and Work-in-Progress a/c credited.

Kindly please answer. Also please give reference to the Accounting standard or Guidance Note.

Maninder Jain

Maninder Jain (Expert)
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15 April 2011 Since the benefit of compuers, chairs, table will extend beyonf one year, i suggest you to capitalise the capital expenditure & claim depreciation benefit on it.

Later when the project is over, the assets can be sold & differnce in WDV & sale price can be treated as profit/loss in books.