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Method-1
Example
ABC Ltd. Purchases a machinery for Rs. 30 lakhs with a useful life of 5 years and ‘Nil’ salvage value. It gets Rs. 10 lakhs as a grant from the government for this machinery.
a) The Gross value of machinery will be shown as Rs. 30 lakhs in the balance sheet along with Rs. 10 lakhs as ‘Deferred Government Grant’.
b) Rs. 6 lakhs (30 lakhs / Useful life i.e. 5 years) will be charged to profit and loss account each year as a depreciation along with an income of Rs. 2 lakhs (10 lakhs / Useful life i.e. 5 years).
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Example
ABC Ltd. Purchases a machinery for Rs. 30 lakhs with a useful life of 5 years and ‘Nil’ salvage value. It gets Rs. 10 lakhs as a grant from the government for this machinery.
a) The Gross value of machinery will be shown as Rs. 30 lakhs in the balance sheet along with Rs. 10 lakhs as ‘Deferred Government Grant’.
b) Rs. 6 lakhs (30 lakhs / Useful life i.e. 5 years) will be charged to profit and loss account each year as a depreciation along with an income of Rs. 2 lakhs (10 lakhs / Useful life i.e. 5 years).
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Method -2
Example
ABC Ltd. Purchases a machinery for Rs. 30 lakhs with a useful life of 5 years and ‘Nil’ salvage value. It gets Rs. 10 lakhs as a grant from the government for this machinery.
a) The gross value of machinery will be shown as Rs. 20 lakhs (30 lakhs – 10 lakhs) in the balance sheet
b) Rs. 4 lakhs (20 lakhs / Useful life i.e. 5 years) will be charged to profit and loss account each year as a depreciation on this machinery.
Join soon @commerceoptional
Example
ABC Ltd. Purchases a machinery for Rs. 30 lakhs with a useful life of 5 years and ‘Nil’ salvage value. It gets Rs. 10 lakhs as a grant from the government for this machinery.
a) The gross value of machinery will be shown as Rs. 20 lakhs (30 lakhs – 10 lakhs) in the balance sheet
b) Rs. 4 lakhs (20 lakhs / Useful life i.e. 5 years) will be charged to profit and loss account each year as a depreciation on this machinery.
Join soon @commerceoptional