Capital Subsidy Effect in Balance Sheet

Amit Joshi (Prop) (28 Points)

20 September 2010  

Our firm has purchased machines over the last few years on which we have availed Capital Subsidy under CLCSS Scheme. The Receipt of Capital Subsidy was effected to Reserve & Surplus Heading in the Balance Sheet & not reduced the Fixed Asset amount by the Same. We have availed Depreciation on full amount. We have taken in to account the 5 years for which (there was a clause in the awarding of Subsidy scheme) the machinery was to be retained. We intend to reduce the Machinery Value by the Subsidy amount at the lapse of the 5th Year. Is it a wrong practice.? If so advise me.