Advice on profit computation, Revenue recognition and Inventory - Professionals - Accounting - TIK Share

Advice on profit computation, Revenue recognition and Inventory


SANJAY KUMAR GANNA

2014-01-20

ARRIVE PROFIT PRIVATE LIMITED is a company which is doing business of Constructing apartmets/Villas

Company started on 01.04.2012 and carried on following activities:-

 

  1. Agreement with Land Owner as below:

        (i)  Company will construct 15 Villas on his Land out of which 7 will be handed over to land              owner and remaining will be sold by the company itself.

       (ii)  Goodwill of Rs. 35,00,000 will be paid to Land owner.

  1. The Company completed 2 villas on 31.03.2013 with expenditure including Material of Rs. 1,70,00,000 of Which 1,00,00,000 Material which includes 5.5% Vat, 50,00,000 includes 5% VAT and Remaining includes VAT @ 14.5%
  2. Company spent Rs. 1,25,00,000 for Designing on Which service Tax 12.36 included and paid other cost for all the villas Rs. 1,00,00,000.
  3. Company received advances of Rs. 1,00,00,000 and 10,00,000 from its customer for booking of Two Villas.
  4. Selling price of 1 Villa is Rs. 2,00,00,000
  5. Approximate construction cost of 1 Villa is Rs. 1,00,00,000
  6. It is expected to complete all villas in 5 years.
  7. As per Law company should sell the Villas by charging VAT and Service Tax.
  8. You are required to advice on profit computation and Revenue recognition.
  9. Also comment on the Inventory.

Rahul Rai

2014-01-22

The accounting of ARRIVE should be done keeping in mind the AS-7.

Revenue recognisation, Inventory and profit should be calculated as per Accounting Standard-7.

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