Journal entry

Subsidy received for asset can be deducted from the cost of assets or it can be systematically deferred in Profit and loss account as per related expenses of asset are deferred during the life of the asset

For receipt of subsidy in bank

Bank a/c Dr
to Capital Subsidy a/c

For purchase of asset

Fixed asset a/c dr
to Bank a/c

or Fixed asset a/c dr
to Subsidy a/c

If subsidy is deferred in profit and loss (every year for life of asset)

Depreciation a/c dr
To fixed assets a/c

P/L a/c dr
to Depreciation a/c

Subsidy a/c dr
to P/L a/c


Depreciation should be deducted from cost of asset and then subsidy should be deducted from carrying amount of asset

Right now I have to pass the entry of capital subsidy receipts, you want to say that you have to reduce the value of the asset and credit it to the subsidy account.

Bank a/c Dr

to Capital Subsidy a/c Cr.

 

OR 

Fixed asset a/c dr

to Subsidy a/c Cr.

 

Entry for subsidy received in bank

Bank a/c dr
to Subsidy a/c

For purchase of fixed assets

Fixed assets a/c dr
to Bank a/c


And for deduction of subsidy from fixed assets

Subsidy a/c dr
to fixed assets a/c

Either 

Bank a/c dr

To Subsidy Cr. - income head

or

Subsidy a/c

To Fixed assets a/c 

will work as per the new Amendment Made by the Finance Act, 2015. It isn’t using method of accounting for grants of assets rather than deferring. 

https://kb.icai.org/pdfs + 

 

 

 

ok

 Depreciation and method to reduce the asset value= (cost of machine - grant amount / machinery useful life)
In the balance sheet: 
Asset machinery (cost of asset- grant amount)
Less: Accumulated depreciation= use above formula.

this gives the NBV, reduced cost of machinery