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.
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.
CAclubindia
