2019 SD Q1 goverment grant

You should be aware that you will find most answers to "accounting" Qs in SBR/P2 - or in this case FR/F7 - there is an example 7 in Chapter 5 that covers this. But as you've asked here - here are the entries for a grant related to the purchase of an assets. Suppose the asset cost 10,000 (Dr Asset/Cr Cash) and the grant is for 6,000 (Dr Cash/Cr "Deferred income"). Suppose asset has a useful life of 10 years - Dr Depreciation/Cr Accumulated depreciation 1,000 each year for 10 years IAS 20 says deferred income is "recognised in profit or loss on a systematic basis over the useful life of the asset" - it doesn't say where in profit or loss so it could be "other income" or it could be "matched" against the related expense - i.e. depreciation - so: Dr Deferred income/Cr Depreciation 600 - each year for 10 years. i.e. net cost of the asset to the company was 4,000 and the net expense in profit or loss is 400.