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Editorial Board on Accounts and Audit
  • Money received from Leasing

    by Chirag on Sunday, September 01, 2019 at 03:36 PM

    Sir, We have a Shopping Mall wherein there is a Cinema Hall. The space of cinema hall WAS LEASED To M/s A Ltd. It pays us Lease Rent every month. On 1.6.18 agreement between us & A Ltd was Terminated & hence we paid 1.20 crores to A Ltd. FROM 1.6.18 to 30.9.18 WE OPERATED THE CINEMA HALL BY OUR OWN. AGAIN ON 1.12.18 WE GIVEN THE SPACE OF CINEMA HALL TO B LTD FOR 3 CRORES ON LEASE. Lease Rent will be given by B Ltd on per month basis. Note- We are a company & charges rent from shops in mall

    Replied byEditorial Board Tuesday, September 03, 2019 at 07:48 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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