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Grant accounting

Anil Sharma (Accounts Manager) (50 Points)

18 January 2013

My Question:-

I have received the grant of Rs. 1 Lakh from Govt. for purchasing fixed assets of Rs. 20 K and incurring the office expenses.

I want to understand accounting of fixed assest to be adjust with govt grant and if any depreciation is avilable or not.

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2 Replies

Ankita Benegal (CA Final) (66 Points)
Replied 18 January 2013

According to AS-12,Grant amount Rs.20,000 can be capitalised and Rs.80,000 can be shown as an item of Exceptional Income in the Profit and Loss Account.Depreciation can be applied normally as per AS-6 read with AS-10.Grant should be written off and adjusted in proportion with Depreciation.

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Sanket (!..Live to Give..!) (16427 Points)
Replied 18 January 2013

When a grant relates to a fixed asset, SSAP 4 recognises that there are two potential balance sheet treatments available to entities:

(a) to treat the amount of the grant as deferred income which is credited to the profit and loss account by instalments over the expected useful economic life of the related asset on a basis consistent with the depreciation policy

(b) to deduct the amount of the grant from the purchase price or production cost of the related asset, with a consequent reduction in the annual charge for depreciation.......

Hope you got it.....