accounting entries-government grant

Nalini Bajracharya (employee) (48 Points)

28 February 2010  

Dear all, 

 

Can you please tell me the answer of the following question as soon as possible.

 

This relates to the audit of a hospital. The hospital gets donations in the form of a machinery and equipments along with the bill / invoice for the same(thus no value problem as such). 

On the receipt of the asset the hospital passes the following accounting entry:-

                     Asset a/c Dr.

                             To Capital Reserve

 

And at the end of the year, they depreciate the asset and passes the following entry:-

 

                   Depreciation a/c Dr 

                                    To asset

 

and

 

                      Profit and loss a/c Dr.

                                  To Depreciation

 

 

Nothing is happening to the capital reserve.....

 

The capital reserve should also have been reduced.\

 

 

Can somebody tell me the correct entries..............

 

 

Pls pls pls its a little urgent.................

 

 

Thanks and regards

 

Nalini