Formulation of A/C Standards
Quick practice
Question 1 of 5
K Limited has set up its business in a designated backward area which entities the company to receive from the Government of India a subsidy of 20% of the cost of investment. Having fulfilled all the conditions under the scheme, the company on its investment of Rs. 50 crores in capital assets received Rs.10 crores from the Government in January 2020 (accounting period being 2019-2020).
The company wants to treat this receipt as an item of revenue and thereby reduce the losses on profit and loss account for the year ended 31st March 2020.
What will be the correct treatment in the above case?
Treat it as revenue.
Take it as a credit to deferred income.
Reduce it from the cost of the asset.
Take it as a credit to capital reserve.
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