Dear All,
The brokerage on land purchased is to be considered as cost of acqusition or claimed as expense in the books of accounts ?
the land in this case is considered as stock in trade.
Thanks in advance !
12 Replies
@rinssss
(ca)
(119 Points)
Replied 12 September 2011
In my opinion It will claimed as expense Coz Land here is stock in trade.
whereas if it will be an Asset then it wil treated as part of asset bcoz as expenditure borne on asset upto put to use is incuded as capital expenditure on asset purchase.
Parmod Rawat
(B.COM,MBA,CWA Inter)
(401 Points)
Replied 12 September 2011
it should be treated as revenue expenditure & it will directly goes to p&l....
CA Sachin Rastogi
(Audit/IFRS Manager)
(338 Points)
Replied 12 September 2011
Well i believe that brokerage paid is a part of cost incurred for bringning the inventories to their present location and condition. Since, brokerage is an inherent cost for buying inventories so it should be strictly considered as a part of cost of land irrespective of the fact that it is for inventory purpose or for asset purpose.
In case of inventories these costs will automatically goes to income statement when they are sold off by the entity. Until then, it forms the partof cost of land.
Bhaskar Unnikrishnan CPA CMA
(Accounts / Administration)
(414 Points)
Replied 13 September 2011
Dont you guys think it should be treated like freight and carriage cost in case of purcahse of raw materials???
CS Bijoy
(Expert)
(6394 Points)
Replied 13 September 2011
It should be treated as revenue expenditure and can not be treated as freight to capitalized...
Bhaskar Unnikrishnan CPA CMA
(Accounts / Administration)
(414 Points)
Replied 13 September 2011
Have done some research on above and agree that it should be treated as Revenue Expenditure... Thank you mates...
CA Sachin Rastogi
(Audit/IFRS Manager)
(338 Points)
Replied 13 September 2011
Hi my view of capitalising the brokerage to the cost of land is based on the current indian accounting standards and international accounting standards.
I would appreciate if some one can share the standard/ guidance issued by the competent authority for proving this expense to be of revenue nature.
Ramanuj
(Accountant.)
(834 Points)
Replied 13 September 2011
It is revenue expenditure & treat as P/L a/c
.
Akshata Jagtap
(Article Assistant)
(53 Points)
Replied 15 September 2011
But if i dont pay the brokerage to the broker he can not stop the transfer of title, he can only file a suit for non payment. i.e brokerage need not necessarily brings the inventories to their present location and condition. here even if i dont pay brokerage i will get the land
Pls explain the above situation
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