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AS 12

sivasubramanian (articled assistant) (79 Points)

08 July 2009

a company has received a grant of 14 lacs. 7 lacs is for capital exp. and the other half for revenue. the money rec for revenue has been given to a party as an advance for purchase of raw materials. my doubt is how to account as per as 12 the govt grant paid as advance to the party . pls clarify.

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Krutesh Patel (ACA) (727 Points)
Replied 08 July 2009

Originally posted by :sivasubramanian
"	a company has received a grant of 14 lacs. 7 lacs is for capital exp. and the other half for revenue. the money rec for revenue has been given to a party as an advance for purchase of raw materials. my doubt is how to account as per as 12 the govt grant paid as advance to the party . pls clarify.	"

Hello friend,

I want to know whethe grant in revenue nature is given for purchase of any material. If it is so then cost of material should be reduced by grant so received. But if grant is for general revenue expenditure, it is better to credit it in the profit and loss a/c as per AS12. Advance to supplier is transaction not covered in AS 12 even if money received as grant is used. It will be given usual accounting entry.

Bye