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As 12 government grant

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25 January 2012 WE RECEIVED A STATE GOVT GRANT OF Rs. 100000 FOR PURCHASE OF MACHINERY-
suppose
(1)we purchase rs.90000 machinery
(2)we purchase rs.120000 machinery
in both cases what is a/c entry passes(where reflects profit & loss a/c or balancesheet):-
(a) when we received rs.100000 gov. grant
(b) when we purchase rs.90000 machinery
(c) when we purchase rs.120000 machinery
(d)depreciation entry
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CA Siddhartha Bhardwaj

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CA Siddhartha Bhardwaj (Expert)
12 May 2012 1. Treatment of government grant in relation to fixed aseets can be done in 2 ways:

(a) Reduce the grant from the cost of the asset and depreciation shall be charged on the balance amount.

(b) Treat the grant as deferred grant. In this case the asset will be recorded at its original cost. The grant will be credited to P&L A/c over the life of the asset. Depreciation will be charged on the original cost of the asset.
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