Government grant?

A/c entries 893 views 3 replies

vs

none

90 Points Joined February 2011

I am an article student .. I have doubt on government grant – AS 12.. pls clarify.

The college we audit gets grants for salary, electricity, telephone expenses from its university(Govt. university) every month.

The following are the entries passed by them..

1.Bank a/c Dr

To university a/c ( shown under liabilities in Balance sheet)

2.Salary a/c Dr.

Electricity a/c Dr.

Telephone a/c Dr.

To bank a/c

Thus the P/L a/c is not affected..

I thought the following entries should be passed…

1.Bank a/c Dr.

To grant received a/c ( to be shown in P/L as income)

2. Grant received a/c Dr.

To university a/c

and then the payment entry...

My Boss told me that the entry passed by them is right and is asking me to find the reason for the same…

what type of grant is this - Grants related to promoter’s contribution or Grants related to compensation for expenses? What is the accounting entry? will P/L a/c be affected or not?

Replies (3)

Venkata Mohana Rao Pathakota

Excelling

190 Points Joined August 2011

Hi VS...

1.Bank a/c Dr

To university a/c ( shown under liabilities in Balance sheet)

The first entry to book the grant recd which will be shown in B/S

2.Salary a/c Dr.

Electricity a/c Dr.

Telephone a/c Dr.

To bank a/c

The second entry will book the expenses which were incured and the same will be transfered to the P&L as follows.

P&L A/C Dr

To Salary a/c

To Electricity a/c

To Telephone a/c

Hence P&L A/C got affected to the extent of exp incurred.

adamya

Consultant

50 Points Joined June 2010

at the end everything will adjsuted.

loss in P&L will stand against the university (liability)

this will keep control to ensure proper utilisation

Kolluru Krishna Murty

Partner

315 Points Joined December 2011

No one explined to that gentleman what the grant is.

The grant is an amount given by Govt/Autonmous bodies/Aid-banks for a specific purpose subject to specific conditions.

The grant should be shown separately in P&L a/c separately and the expenditure incurred against that also should be shown separately in such away that it is possible to know the grant -vs-vis- Expd.

kkm