Doubts in grant asset accounting

Anil kumar D.V (CHARTERED ACCOUNTANT) (267 Points)

08 June 2012

Dear Friend/Sir

If one EQUIPMENT COST 15 LACS, GRANT RECEIVED from university 10LACS to purchase asset AND Management contribution 5 lacs ,

What is accounting treatment for 5 lacs given by management????,

can we claim depreciation for 5 lacs ,

Note: grant received by education institution and received from VTU/UNIVERSITY

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shankar (CA, CS Final) (243 Points)
Replied 08 June 2012

Dear Anil

There are two methods of presentation in financial statements of grants related to specific fixed assets are regarded
as acceptable alternatives.

Under one method, the grant is shown as a deduction from the gross value of the asset concerned in arriving at its book value. The grant is thus recognised in the profit and loss statement over the useful life of adepreciable asset by way of a reduced depreciation charge. Where the as deferred income which is recognised in the profit and loss statement on asystematic and rational basis over the useful life of the asset.
Under second method, grants related to depreciable assets are treated as deferred income which is recognised in the profit and loss statement on a systematic and rational basis over the useful life of the asset. Such allocation to income is usually made over the periods and in the proportions in which depreciation on related assets is charged.

Thanks & regards

Shankar

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