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Editorial Board on Accounts and Audit
  • Money on leasing

    by Chirag on Sunday, September 01, 2019 at 03:41 PM

    Dear Sir, Continuing just asked query- During the course of operating Cinema hall BY OUR OWN , FOCUS LAMP PURCHASED FOR CINEMA HALL, COMPUTER PURCHASED FOR CINEMA HALL & OTHER ASSETS PURCHASED SHOULD BE CAPITALISED IN BALANCE SHEET ?? Note- In my opinion we should charge it in P&L A/c as WE HAVE AGAIN LEASED THE SPACE FOR 3 CRORE IN LUMPSUM, SO ASSETS FOR CINEMA HALL IS OF NO USE & SHOULD BE CHARGED TO P&L A/c . Do you agree ?? Pls share you deep insights & knowledge on this matter ??

    Replied byEditorial Board Tuesday, September 03, 2019 at 07:49 PM

    As per the definition of property, plant and equipment (hereinafter referred to as ‘fixed assets) as given in AS 10, assets held for rental to others and expected to be used for more than 12 months are considered as fixed assets.

    Therefore, in the present case, if the company purchased those items with an intention to lease them along with the cinema hall, such items shall be capitalised in the books of the company at the time of purchase. After leasing, the accounting for lease of cinema hall should be similar to leasing of those items.

    The accounting treatment of leasing shall be done in accordance with AS 19, Lease.

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