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On 1 July 20X1, Saint received a government grant for $4,000. This grant was provided as a contribution towards the costs of training employees over the next two years. Saint has reduced its administrative expenses by the full $4,000.
May I ask how to account for this government grant regarding the scenario above?
Thank you very much.
PS,
Model answer is like that(W8) Government grant
This is a revenue grant. It should be recognised in profit or loss on a systematic basis. The grant is intended to cover training costs over a two year period and so it should be recognised in profit or loss over two years.
Saint should increase its expenses by $2,000 (1/2 × $4,000) and record the balance as deferred income on the SFP.
Dr Admin expenses/retained earnings (W1) $2,000 Cr Current liabilities $2,000However, I could not understand this model answer.
My understanding is like that
Dr Cash 4000 Cr Deferred income 4000
Dr Deferred income 2000 Cr Income for gov. grant 2000Could you please help me out?
thank you.
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