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Clarification on accounting treatment of Assets being converted into stock in trade

Forums › ACCA Forums › ACCA AA Audit and Assurance Forums › Clarification on accounting treatment of Assets being converted into stock in trade

  • This topic has 0 replies, 1 voice, and was last updated 13 years ago by Anonymous.
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  • December 14, 2011 at 5:41 am #51058
    Anonymous
    Inactive
    • Topics: 1
    • Replies: 0
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    Dear all

    I dont know if this is the right place to post this question, but am in need of urgent advice regarding this matter.
    My company is into catering business, and its planning to open a new division which will be responsible for providing services to existing locations.
    There is a plan to transfer all unused fixed assets to this division. this division will do the repairs etc and charge 15% profit when they supply these assets to the other units based on the request/requirement from these units.
    My question is – 1) is it correct to convert these assets to stock in trade at NBV
    2) is charging 15% margin when selling these assets within the company units is correct .( it can be sold to outside parties also)
    3)once this is sold to sister units it will again be fixed assets and depreciation charged
    4)I already incurred cost in purchasing them initially and again am going to pay for it when the units will require them for use.
    5) the 15% profit is internally generated. are these profits to be considered real or just book profits.
    Am totally confused about the accounting and financial aspect of these transactions.
    Can any one pls help as i just joined this company.

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