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Hi sir,
Can you provide example to illustrate this point:
“Grant repayable, first shown against any remaining deferred income balance. If payment exceeds the deferred income balance then the excess payment is treated as an expense.”Hi,
The grant will initially have been recognised through the following journal entry:
DR Bank
CR Deferred incomeThe deferred income is then released over the life of the asset, assuming it is a capital grant, and therefore the deferred income balance will decrease each year.
Let;s assume the deferred income balance is $10,000 and if the grant repayable is $15,000 then the following entry is posted:
DR Deferred income $10,000
DR Expenses $5,000
CR Bank $15,000When we reduce the $10,000 deferred income balance there is an insufficient amount so we have to process the additional entry of $5,000 as a debit to expenses.
Thanks
Sir in what circumstances does the grant repayable can becomes more than the balance? or is it given in question. Are we supposed to calculate the amount repayble?
Hi,
It depends on what has been released from the deferred income balance and what amount of cash is required to be paid, both of which will depend upon the specific circumstances within the question.
Thanks
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