Accounting treatment

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Denis (Querist)
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01 June 2013 Hi,
I need to ask regarding to an accounting treatment to be made in the books. We purchased a new machine which was received in Jan 2013, and the original cost was take in the books as the advance payments were paid and recorded in Y2012. Since the machine cost was Rs. 52.92 lacs (added in FA-machines) we made application to govt. based organization to support us and finally, we got the subsidy from them of Rs. 29.40 lacs . So, what will be the accounting treatment. Do let me know at the earliest.

Karan Teli

Karan Teli (Expert)
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03 June 2013 Two ways we can treat as per AS - 12,
(i) Deduct from the asset and charge depreciation prospectively. i.e Cost = 52.92 lacs - Grant = 29.40 lacs will be 23.52 lacs and now start depreciating this amount.
(ii) Treat it as deferred income and take the proportionate amount every year as income in Profit and Loss A/c across useful life of asset.

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Denis

Denis (Querist)
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03 June 2013 Hi Karan, How are you. Thanks for your reply. I will not go with the point 1 as suggested. but point 2 would be considered. Now talking about the deferred income, should be under liabilities and amortize it under Other income (financial income) over the useful life of the assets. say the useful life is 10yrs.

Karan Teli

Karan Teli (Expert)
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14 June 2013 yes. the same has to be done

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