MURALI SRINIVASAN (INTERNAL AUDITOR) (76 Points)
03 November 2010A CONSTRUCTION COMPANY WHICH IS IN THE CONSTRUCTION OF RESIDENTIAL APARTMENTS HAVE ENTERED INTO SALE AGREEMENT FOR CONSTRUCTION OF FLATS THIS YEAR
THE CONSTRUCTION OF FLATS HAVE ALREADY BEEN COMPLETED LAST YEAR
REVENUE RECOGNITION CAN BE DONE IN PREVIOUS YEARS OR THE SAME CAN BE DONE THIS YEAR ONLY
S.MURALI
V P Narasimhan
(Accounts Manager)
(791 Points)
Replied 03 November 2010
As per the Accounting Standard the revenue recoginition has tobe made based on the % of completion method. i.e total project cost+estimated profit & actual expenses incurred as on that date. If you go thro' Accounting Standard 7 ( i suppose) you will have a clear picture as for as construction industry is concerned. All becoz in case of a manufacturing unit you can find out the finished goods, inventory, semi-finished goods etc., But this is very difficult in realistic in construction industry thats why the % of comletion method has to be adopted.
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