Help please - if a company receives a grant to help the business where does it show in the accounts. Dr the Bank and Cr where... where does it go. Please anyone??
There are basically two different sorts of grant. Capital or revenue.
Capital grants are for a specific item of expenditure and will normally be released from a reserve over the useful economic life of the asset to which they relate.
Revenue based grants would be classified as other income and go to the P&L (this is the sort of Grant that Sue was talking about).
Be careful when you allocate a grant as it should only be recognised when you have a right to receive it.
Generally receipt of a grant also necessitates the creation of a liability which remains until the conditions of receipt of the grant have been met in full.
For more information on this take a look at SSAP4 Accounting for Government Grants (The full document can be accessed via the ASB website).
In short you need to know what the grant is for (a specific asset or general running expenses) and what conditions are attached to it.
Once you know these then post again and we'll hopefully be able to guide you a little better as to where it should go.
Kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
