Sunny (CA Business) (401 Points)
09 May 2010Hi all,
Can anyone suggest me the accounting of the following query:
A Company XYZ Pvt. Ltd. has a dairy farm of its own. Livestock is there asset. Now there are many new born calf (both male and female) amongst the livestock.
How the company should capitalise the cost of the calf(both male and female). What are the various costs that will be considered while capitalising. Also when it should be capitalised?
Thanks
the new born calf should go under the head bonus with nil cost.....
I AM ATTACHING A FORMAT OF THE SAME PREPARED BY ME....
Sunny
(CA Business)
(401 Points)
Replied 09 May 2010
Hey thanks arvind..
But my concern is what would be the effect of cost of feed, fodder, water, housing for calves. Also, if we purchase new calf from outside then its value would be much higher than considering NIL cost. If we consider Fair value concept for the same then it might be violated....
Sunny
(CA Business)
(401 Points)
Replied 10 May 2010
Hey thanks.
But Livestock is fixed asset and not stock. So we cant go as per Cost or NRV whichever is less.
Expenses related to asset should be capitalised to that asset only (subject to brought to production) and not to any other asset as per my view.
Thanks
Sunny
(CA Business)
(401 Points)
Replied 10 May 2010
My view is as follow:
Whatever cost (feed, fodder, milk, water, shed, interest) we incur for female calf should be entered as Livestock WIP a/c debit Cash/Bank a/c credit. And when the female calf comes to production then livestock a/c will be debited and livestock wip a/c will be credited.
But now the concern is if we take all the above mentioned cost to that specific WIP cost then its cost may go much higher than actual purchase from outside. So, in that case what to do.
And what about male calf. They can never be capitalised as they can never come to production.
Now whether my opinion is correct or incorrect and if incorrect then why?
CAclubindia
