As - 12
This query is : Resolved
06 August 2011
My friend has Started manufacturing unit of Flour mill for which bought major fixed assets in 2002-03. In regard of these fixed assets of rs. 100 cr. he got Subsity from government of rs.30 cr.in 2010-11.
I want to know that :-
1. subsidy will be treated as income in 2010-11.
2.it may be deducted from fixed assets. If yes, How and which name and what will the treatment of Depreciation.
Please advice correct and as soon as possible
I want to know that :-
1. subsidy will be treated as income in 2010-11.
2.it may be deducted from fixed assets. If yes, How and which name and what will the treatment of Depreciation.
Please advice correct and as soon as possible
06 August 2011
Dear Sir,
There are two treatment in case of depreciable fixed assets
Grant is shown as deduction from gross value of asset in arriving its book value.
2)grants are treated as deferred income.
in ur case treatment is
bank a/c dr 30/-
To fixed asset
book value is reduced to 70 crore and depreciation is charged every every
or
bank a/c dr 30/-
To deferred govt grants
book value is 100 crore
There are two treatment in case of depreciable fixed assets
Grant is shown as deduction from gross value of asset in arriving its book value.
2)grants are treated as deferred income.
in ur case treatment is
bank a/c dr 30/-
To fixed asset
book value is reduced to 70 crore and depreciation is charged every every
or
bank a/c dr 30/-
To deferred govt grants
book value is 100 crore
06 August 2011
Dear Sachin sir,
in capital approach, why not adjustment of depreciationis required to be done from 2002-03 to 2010-11.
in income approach, what amount of Depreciation or any other required to be taken in profit & loss account
in capital approach, why not adjustment of depreciationis required to be done from 2002-03 to 2010-11.
in income approach, what amount of Depreciation or any other required to be taken in profit & loss account
06 August 2011
in income approach the grant has to recognised in profit and loss account over the life of asset in proportion to depreciation.Suppose dep is 4 lakh per annum for 4 years hence grant to written off will be 2 lakh per annum for the year.it comes to 25% p.a of grant amount by slm method.
deferred govt grant a/c dr 2 lakh
To p&l a/c
in capital approach it is in appropriate to recognize govt grant in p&l a/c since they are not earned but represent as incentive provided by govt without related cost.
deferred govt grant a/c dr 2 lakh
To p&l a/c
in capital approach it is in appropriate to recognize govt grant in p&l a/c since they are not earned but represent as incentive provided by govt without related cost.
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