Deferred Government Grant
A government subsidy received for an asset, released to income over the asset's life instead of all at once. On the Balance Sheet.
In detail
When a government body or tourism board gives money toward an asset, the cash arrives at once but the benefit lasts as long as the asset does. Accounting standards therefore park the grant here as a liability and release it to Government Grant Income over the useful life of the asset, matching the income with the depreciation charge. The receipt credits this ledger; each year a Journal Entry debits it and credits Government Grant Income. Booking the whole grant as income on receipt inflates one year's profit, invites a higher tax bill and misstates later years. Keep the grant letter attached, since the IRD and the grantor may both ask how it was recognised.
Formula
Annual release = Grant received / Useful life of the subsidised asset in years
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Bank Account | Rs 5,00,000 | |
| Deferred Government Grant | Rs 5,00,000 |
How to record it in BRAccount
- 01Go to Invoicing > Journal Entry > New dated the day the grant is received.
- 02Debit the bank account and credit Deferred Government Grant for the full amount.
- 03Attach the grant letter and submit. The entry below posts.
- 04Each Ashadh end, post a Journal Entry: Dr Deferred Government Grant, Cr Government Grant Income for one year's release.
- 05Check the remaining balance on Financial Reports > General Ledger against the asset's remaining life.
When to use it
Post by Payment Entry when the grant arrives. Release a portion each year by Journal Entry to Government Grant Income.
Example from the demo books
Dr Bank Account Rs 5,00,000, Cr Deferred Government Grant Rs 5,00,000 for a tourism board subsidy on an electric vehicle.