On 1.4.2001 ABC Ltd. received Government grant of ` 300 lakhs for acquisition of a
machinery costing ` 1,500 lakhs. The grant was credited to the cost of the asset. The life
of the machinery is 5 years. The machinery is depreciated at 20% on WDV basis. The
Company had to refund the grant in May 2004 due to non-fulfillment of certain conditions.
How you would deal with the refund of grant in the books of ABC Ltd.?
In your case govt grant credited to asset a/c when it was received. Now you will refund that grant, then it should be debited to Assets a/c.
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