Era Limited installed Plant and Machinery costing 100 lakhs on 1 st April, 2023 and received a Government Grant of 40% towards its cost on the same…

Journal Entries in the books of Era Limited Date Particulars ₹ in Lakhs ₹ in Lakhs 01/04/2023 Plant & Machinery A/c Dr. 100.00 To Bank A/c 100.00 (Being Machinery Purchased) 01/04/2023 Bank A/c Dr. 40.00 To Plant & Machinery A/c 40.00 (Being Grant received from the Government Credited to Plant and Machinery Account) 31/03/2024 Depreciation A/c Dr. 10.00 To Plant & Machinery A/c 10.00 (Being Depreciation charged) 31/03/2024 Profit & Loss A/c Dr. 10.00 To Depreciation A/c 10.00 (Being Depreciation transferred to Profit & Loss A/c) 01/04/2024 Plant & Machinery A/c Dr. 25.00 To Bank A/c 25.00 (Being Government Grant on asset partly refunded with a corresponding increase in cost of asset) 31/03/2025 Depreciation A/c Dr. 16.25 To Plant & Machinery A/C 16.25 (Being Depreciation charged on SLM on revised value of Plant & Machinery prospectively) 31/03/2025 Profit & Loss A/c Dr. 16.25 To Depreciation A/c 16.25 (Being Depreciation transferred to Profit & Loss A/c at the end of Year 2) Working Notes: 1. Depreciation for the year ended 31.03.2024 (Cost of Machinery – Grant Received – Residual value) / Useful life = (100-40-10)/ 5 Lakhs = 10 Lakhs 2. Depreciation for the year ended 31.03.2025 Particulars ₹ in Lakhs Cost of Asset 100.00 Less: Government Grant Received 40.00 60.00 Less: Depreciation for first year i.e. 31.03.24 10.00 50.00 Add: Government Grand Refunded 25.00 Depreciation for second year (75-10) /4 i.e. 31.03.25 75.00 16.25