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Account classification

Asad Zia (Accountant) (87 Points)

01 March 2016

Dear Sir,

I am presentl in a new incorporated company whose book of account have not been maintened. So kindly help me.

1) The company office is of one of the director's who has given for the company. If we take it into capital then the assets which are pre installed in it. how to evaluate their value with all assets. The office was closed for last 5 years and was used by other company.

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4 Replies

Saliq Ansari (CA_Final Student) (885 Points)
Replied 01 March 2016

If the office belong to the Director and he had willingly given it to the company for use then here the original owner of the property is the director, it will be inappropriate to take such property in the books of the company.

There are other matter that you should verify, whether there is any Rent Agreement entered between Director to rent the office to the Company.

If u have any further query feel free to ask

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Asad Zia (Accountant) (87 Points)
Replied 02 March 2016

Dear sir, I would like to clarify that the company has four directors. The office is owned by one of the directors. And that director has another buisness which was running in the same office five years ago. And the equipment(fans ac chairs are installed in it). So kindly tell me a way for the evaluation of the building as there has been some naintenance cost incureed on the equipmeng office. The office is owned by the director not rented.

Saliq Ansari (CA_Final Student) (885 Points)
Replied 02 March 2016

First of all you would have know about the terms & conditions agreed upon by the Director Owning Office & the Company.

There could be following possibilities

1st Possibility

If the director has given the place for free to the company to use as its office then No entry in the books of the Company.

2nd Possibility

If the director has given the office for shares (Capital) in the company, then this results in non cash transaction and the office and all assets should be booked in the Books of Accounts of the Company at

Fair Value of the Assets taken up. OR
Amount of Shares issued to the Director

Whichever is more clearly evident.

3rd Possibility

The Director has given up his office to company to use as its place of business for some consideration i.e.

they have dicided that the company will pay fixed amount monthly to director, or
would pay certain percentage of profit or
Compensate the Director by any other way mutually agreed upon between

In this situation Asset would not be booked in the Books of Accounts of the Company, and the payment made would be booked as expense.

If there is still any doubt feel free to Ask

Saliq Ansari