I am an article student .. I have doubt on government grant – AS 12.. pls clarify.
The college we audit gets grants for salary, electricity, telephone expenses from its university(Govt. university) every month.
The following are the entries passed by them..
1.Bank a/c Dr
To university a/c ( shown under liabilities in Balance sheet)
2.Salary a/c Dr.
Electricity a/c Dr.
Telephone a/c Dr.
To bank a/c
Thus the P/L a/c is not affected..
I thought the following entries should be passed…
1.Bank a/c Dr.
To grant received a/c ( to be shown in P/L as income)
2. Grant received a/c Dr.
To university a/c
and then the payment entry...
My Boss told me that the entry passed by them is right and is asking me to find the reason for the same…
what type of grant is this - Grants related to promoter’s contribution or Grants related to compensation for expenses? What is the accounting entry? will P/L a/c be affected or not?
CAclubindia
