Accounting · Accounting for Government Grants
A technology startup receives a government grant of 20,00,000 rupees specifically for the purpose of purchasing research equipment. The equipment is purchased immediately for 18,00,000 rupees. According to accounting principles for government grants (AS 12), the grant is treated as deferred income to be recognized over the life of the asset. How does the receipt of the grant and the purchase of the asset affect the balance sheet equation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Assets increase by 18,00,000; Liabilities increase by 18,00,000; Equity remains unchanged.
- 2Assets increase by 20,00,000; Equity increases by 20,00,000; Liabilities remain unchanged.
- 3Assets increase by 2,00,000; Liabilities increase by 20,00,000; Equity decreases by 18,00,000.
- 4Assets increase by 20,00,000; Liabilities increase by 20,00,000; Equity remains unchanged.✓
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Assets increase by 20,00,000; Liabilities increase by 20,00,000; Equity remains unchanged.
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