04 August 2011
Friends, I had one query regarding Construction firm building residential flats. In FY 2009-10 the auditor of the firm show the land, office building, borewell. lift, Muni. FSI Exps in Fixed Assets side. Now the current Auditor transfer the said capital expenditure to revenue expenditure by way of journal as WIP.
So query is that is it correct in the accounting treatment or Income Tax Department will disallow the same bcuz the exps was 2009-10 & taking benefit in 2010-11?
One more query that How to book the Income in the P&L account of the said firm? which is the best way to go? what will effect in Member's Contribution received till 31/03/2011?
Member's I hereby request you to pl reply the same ASAP with your Mobile number so i can also talk if there is any confusion.
05 August 2011
it wiill be considered as Prior period expenditure as per AS 5 which says that "prior period items are income or expenses which arise in current period as result of error or ommision in preparation of financaial statement of one or more prior period". About income tax, Prior period iems are allowed in income tax.
For booking income , You have to follow AS 7. which permits proportion completion method. but if you are develpor who are undertaking the construction contract own its account then AS 7 is not applicable.
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