Skip to content

CA Intermediate · Advanced Accounting · AS 12 Accounting for Government Grants

Kaveri Engineering Ltd purchased machinery on 1 April 2025 for Rs 50,00,000 and received a government grant of Rs 10,00,000 related to it. The company follows the method of showing the grant as deduction from the asset's book value. Useful life is 10 years, straight-line, nil residual value. What is depreciation for the year ended 31 March 2026?

Depreciation is Rs 4,00,000. When the grant is deducted from the asset, the depreciable amount becomes Rs 40,00,000 (cost Rs 50,00,000 less grant Rs 10,00,000), and straight-line depreciation over 10 years gives Rs 4,00,000 a year.

  1. ARs 5,00,000
  2. BRs 4,00,000Correct
  3. CRs 6,00,000
  4. DRs 4,50,000

Explanation

Under the deduction method, the book value is 50,00,000 - 10,00,000 = 40,00,000. Depreciation is 40,00,000 / 10 = Rs 4,00,000. Rs 5,00,000 wrongly ignores the grant.

Did you get it right without looking?

One question tells you little. A timed set on AS 12 Accounting for Government Grants shows your real accuracy, how long you take and where you lose marks.

Practise AS 12 Accounting for Government GrantsFree diagnostic mock

More AS 12 Accounting for Government Grants questions