Renting of toys

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 January 2014 Dear Expert,

One of my client is starting renting of toys business . The life of Toys Is between 3 to 12 months.

What should be accounting treatment of toys in books of accounts.

Whether to consider it as inventory or assets & charge depreciation on assets.

If assets whether it will be covered under operating lease & will AS 19 attract?

Thanks in advance

CA SAYANTAN BASU

CA SAYANTAN BASU (Expert)
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16 January 2014 Dear sir ,
In this case in my opinion it is more or less in the same line of renting of vehicles ... The rental income from the toys should be booked in the profit and loss account and toys should be shown in the balance sheet as fixed assets... these toys cannot be considered as stock in trade bcoz this is a business of renting the toys and not for resale of toys ... Any thing which has been purchased for resale is a stock in trade ... they should be treated as assets ....

IF THE TOTAL VALUE OF THE ASSETS IS LESS THAN RS 5000 THEN FULL DEPRECIATION IN A SINGLE YEAR... OTHERWISE WDV METHOD/SLM METHOD HAS TO BE FOLLOWED
UNDER INCOME TAX ACT THERE ARE TWO TYPES OF OWNER 1. BENEFICIAL OWNER 2 . ACTUAL OWNER ...
IN SOME CASES ESPECIALLY UNDER LEASE LESSEE IS ALLOWED TYO CLAIM DEDUCTION FOR DEPRECIATION NOT THYE LESSOR ...