How to treat Received Subsidy

This query is : Open

Nirpendra Singh (Querist)
Follow

31 December 2010 Plz tell me how to treat Subsidy Received due to export of Sugar.
it has been given by Sugar Mill to us because of purchase from him during the year, FROM THEA SAME MILL

CA Kalpesh Gokani

CA Kalpesh Gokani (Expert)
Follow

31 December 2010 It should be treated as Revenue Income..

Other openion may also be solisited

Vivek Raju P

Vivek Raju P (Expert)
Follow

31 December 2010 Looks like this is a trade discount in which case you may reduce the cost of the raw material purchased and debit the sugar mill.

So the entry may be taken as

Sundry Drs ( Sugar Mill). Dr..
Purchases... Cr

Nirpendra Singh

Nirpendra Singh (Querist)
Follow

31 December 2010 MR vivek
please
tell me one more thing
if the transaction of purchase has been incurred 2 years back and we have paid the full amount to the party.
and if the same money is being realised after 2 years as subsidy than how we will treat the same money of subsidy.

Vivek Raju P

Vivek Raju P (Expert)
Follow

01 January 2011 As the accounting period is completed and you cannot adjust the prior year discount in the current period expense, this will be taken to Other Incomes.

So the entries will be

Sundry Drs.... Dr
Other Income..... Cr