Akash Ltd. is constructing a housing society and for this purpose, it has taken loan from a bank. The housing society consists of 50 units, each of…

CA Intermediate · Advanced Accounting · MTP · September 2025
Akash Ltd. is constructing a housing society and for this purpose, it has taken loan from a bank. The housing society consists of 50 units, each of which can be used individually. 20 units have been constructed and can be opened up for public, while construction on the remaining part is continuing. How much borrowing cost should be capitalised:
(A) Capitalisation of borrowing cost should continue for the whole society until construction continues.
(B) Capitalisation of the borrowing costs shall cease to be capitalised for 20 units which are now ready to be used and should continue for 30 units.
(C) The entire borrowing cost should be capitalised at the end of the project.
(D) The Borrowing cost will not be capitalised at all.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

Capitalisation of the borrowing costs shall cease to be capitalised for 20 units which are now ready to be used and should continue for 30 units.

Topics: AS 16

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