Krish (CA Final ) (3331 Points)
26 April 2011PQR Ltd. agrees to construct a shopping complex at a contract price of Rs. 10 Crores. The cost of the project was estimated at Rs. 8 Crores over the construction period of two years. Comment on the following.
- If the estimate of cost has been revised to Rs. 10.5 Crore, and the work on the construction has not started by the end of first year, should any loss be recognised for the first year.
Please help me out.
Devendra
(Chartered Accountant)
(4775 Points)
Replied 26 April 2011
AS PER AS - 7, IF THERE IS AN INCREAE IN THE COST IT SHOULD BE IMMEDIATELY RECONIZED AS AN EXPENSE IN THE BOOKS.
REGARDS,
DEVENDRA K
CA Karan Joshi
(ACA)
(149 Points)
Replied 31 May 2011
the above answer is ..correct...
AS 7 ..clearly says that any increase of estimated increase in cost of contract should b IMMEDIATELY recognised...!!
thus even if work is nt started the loss shall be recognized.
CS,CA F,Numrologi TusharSampat
(CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert)
(85930 Points)
Replied 31 May 2011
| Originally posted by : Devendra | ||
 |
AS PER AS - 7, IF THERE IS AN INCREAE IN THE COST IT SHOULD BE IMMEDIATELY RECONIZED AS AN EXPENSE IN THE BOOKS. REGARDS, DEVENDRA K |
 |
Agreed with Devendra's view
HARPREET SINGH
(Chartered Accountant)
(79 Points)
Replied 31 May 2011
0.5 Cr of the loss should be provided in P&L even constuction has not started.
Thanks
Vivek Mehta (CA, DISA,CS, MBA)
(I am in Practice and also giving understanding and guidance to the Students of CA Final and IPCC for various subjects esp for Direct Tax.)
(1629 Points)
Replied 31 May 2011
Rajnikant Vadigoppula
(CA, CS And CMA Final)
(919 Points)
Replied 31 May 2011
i agree with all above, actual loss should not be considered only provision is made. effect of both are same i.e transfer to P& L A/c.
CA Rakesh Garg
(Asst. MGR Taxation)
(510 Points)
Replied 01 June 2011
whole loss to be recognised during current year.
CAclubindia
