As 12 government grant

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jac (Querist)
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26 January 2012 (((1)))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

(((2))) We received rs 50000 from state government for giving subsidy (revenue income) to institution regularly year to year. Suppose

(1) we paid rs.40000
(2) we paid rs.70000

what is a/c entry passes (where reflects profit and loss account or balance) when we receive rs.50000 from government ?
what is a/c entry passes in above both cases(where reflects profit and loss account or balance)?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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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.

2. Treatment of Revenue Grant

Such grants should either be shown separately under 'other income’ or deducted in reporting the related expense.

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