Vikash Patodia (CA, CS, B.Com) (32 Points)
25 May 2011
Dear Friends, I have a question for u. Pls Help............
A company purchases a machinery and gets 1Kg Gold free alongwith. What should be the treatment of the Free Gift in books of accounts?..................
Jag Bhushan Sharma
(Faculty in a B-School)
(633 Points)
Replied 25 May 2011
The total price paid for machinery can be bifurcated. Gold should be valued at its current price and balance should be shown as the price of machinery.
Desperado
(Cost And Management Accountant)
(129 Points)
Replied 25 May 2011
Dear,
Although not strictly applicable in your situation, still IAS 20 can provide a basic guidelines to resolve the issue. IAS 20 pertains to accounting for the government grants.
You can capitalize / account for the asset at its fair value in your books of account by crediting DEFERRED CREDIT account. Every year, exactly an equal figure would be amortized from DEFFERED CREDIT and accounted for as income in your profit and loss account. Balances of the deferred credit account will be reduced every year with equal figures of amortization booked as income in P&L.
An alternative solution may be applicable in those cases where fixed assets registers do not intake the entries without an amount. In this case you can account for the asset at a nominal value of Re. 1 only by crediting your Other Income account. This will help keeping a monitory control over the asset as it will appear in accounting record as well.
However, I recommend the first solution that is based upon the guidelines of IAS 20.
Best Regards,
Desperado.
CA AMIT AGRAWAL
(Chartered Accountant)
(173 Points)
Replied 25 May 2011
Agree with jag bhushan sharma ji.
CS,CA F,Numrologi TusharSampat
(CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert)
(85930 Points)
Replied 25 May 2011
I tthnk wat Mr Jag Sharma says is correct.
piyush Kumar Gupta
(Accounting / Taxation Consutancy)
(28 Points)
Replied 29 May 2011
Mr. sharma is right
satish kumar Chauhan
(accountant)
(347 Points)
Replied 02 June 2011
I agree with Mr Jag Bhushan sharma
suvo.says@gmail.com
(sap)
(34 Points)
Replied 26 June 2011
Free gifts should be accounted via any Capital A/c, may or may not be clubbed with the machinery according to nature of concern, to be valued @ present value.
CAclubindia
