Government Grant Income
Also called: Subsidy Income
Subsidies from government or donor bodies recognised as income, either at once or released yearly from Deferred Government Grant. On the Profit and Loss statement.
In detail
Government Grant Income is the part of a subsidy that is recognised as income in the current period. A grant tied to an asset is first held in Deferred Government Grant and released here year by year over the asset's life; a grant that reimburses a cost already incurred, such as a tourism board subsidy for a trade fair, is recognised at once when it becomes receivable. The release is a Journal Entry, so nothing in Selling or the Sales Book is involved. The IRD treats most grants as taxable income in the year recognised, which is why spreading an asset grant over its life also spreads the tax. Keep the grant agreement attached to the first entry.
Formula
Annual grant income = Deferred grant balance / Remaining useful life of the asset, or the full reimbursement when received
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Deferred Government Grant | Rs 1,00,000 | |
| Government Grant Income | Rs 1,00,000 |
How to record it in BRAccount
- 01Check the grant agreement for conditions and whether it relates to an asset or a cost.
- 02Go to Invoicing > Journal Entry > New dated Ashadh end, or the receipt date for a cost grant.
- 03Debit Deferred Government Grant, or the bank account, and credit Government Grant Income.
- 04Submit. The entry below posts.
- 05Read the remaining deferred balance on Financial Reports > General Ledger and note it in the accounts.
When to use it
Post by Payment Entry for revenue grants, or by Journal Entry when releasing part of a deferred asset grant.
Example from the demo books
Dr Deferred Government Grant Rs 1,00,000, Cr Government Grant Income Rs 1,00,000 for one year's release of the EV subsidy.