one of our cliet is engaged in in-house developemnt of residential layout. They are following Percentage Completion Method for recognising revenue. presently the sale proceeds received towards sale of sites is treated as liability in balance sheet and the entire developed land (Including Land Purchase and development) is shown as Closing W.I.P. in B/Sheet. Estimated cost is shown only for development aspect and actual admin cost charged to taxable income. for the balance development cost to be inccured the same is treated as provisional Liability and deducted from Sale Proceeds kept as from customers as well as closing W.I.P.
our doubt is whether the provisional liability shown for feture expenses which is deducted from advance as well as closing W.I.P. is correct? are they suppose to recover TDS on Provisional Liability provided? Kindly Clarify
Ex: the project is 4 years or more Area to be Sold - 1000 sft Estimated Cost - 2000/- for development Land Cost - 1000/- Actual in Books actual Development Cost suppose 1 Yr 250/- 2 Yr 400/-
Sale Proceeds suppose 1 Yr 500/- 100 sft 2 Yr 750/- 150 sft
how to recognise the revenue and estimated cost liability will create for sold area
CAclubindia
