Treatment on Free Gift on Purchase

The total price paid for machinery can be bifurcated.  Gold should be valued at its current price and balance should be shown as the price of machinery.

Dear,

Although not strictly applicable in your situation, still IAS 20 can provide a basic guidelines to resolve the issue. IAS 20 pertains to accounting for the government grants.

You can capitalize / account for the asset at its fair value in your books of account by crediting DEFERRED CREDIT account. Every year, exactly an equal figure would be amortized from DEFFERED CREDIT and accounted for as income in your profit and loss account. Balances of the deferred credit account will be reduced every year with equal figures of amortization booked as income in P&L.

An alternative solution may be applicable in those cases where fixed assets registers do not intake the entries without an amount. In this case you can account for the asset at a nominal value of Re. 1 only by crediting your Other Income account. This will help keeping a monitory control over the asset as it will appear in accounting record as well.

However, I recommend the first solution that is based upon the guidelines of IAS 20.

Best Regards,

Desperado.

Agree with jag bhushan sharma ji.

I tthnk wat Mr Jag Sharma says is correct.

Agree with Mr. Jag Sharma ji

Mr. Jag Bhushan Sharma may be right.

Mr. sharma is right

I agree with Mr Jag Bhushan sharma

Free gifts should be accounted via any Capital A/c, may or may not be clubbed with the machinery according to nature of concern, to be valued @ present value.