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Need a help to maintain accounts of work contractor

BHARAT PATEL (Executive Accounts) (66 Points)

10 June 2015

I am going to make books of accounts of a elctrical contractor engage in making electrical panel and maintenance service Please advice me do i have to maintain stock/inventory, now there is many more electrical parts not maintainable

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CA Salman Ansari (Salman Ansari & Assoc.) (247 Points)
Replied 10 June 2015

Hello Bharat,

The factors you need to consider while accounting for such parts is the period for which they remain unused, and their cost in proportion to the service charge. If a particular part remains unused for most of the year, and has a significant contribution to the cost of providing service, then it is better to maintain its stock/inventory. The decision between maintaining inventory or not is quite similar to the decision between treating an expenditure as capital or revenue.

As for the unmaintenable parts, if their materiality is not significant, there is no problem in writing them off.

Hope this was of help.

Ansari Salman

8087945323

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