Paper 1:Jurisprudence, Interpretation and General Laws
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Samrat Limited has set up its business in a designated backward area which entitles the company for subsidy of 25% of the total investment from Government of India. The company has invested ` 80 crores in the eligible investments. The company is eligible for the subsidy and has received ` 20 crores from the government in February 2022. The company wants to recognize the said subsidy as its income to improve the bottom line of the company. Do you approve the action of the company in accordance with the Accounting Standard?
A company had imported raw materials worth US Dollars 6,00,000 on 5th January, 2022, when the exchange rate was ` 43 per US Dollar. The company had recorded the transaction in the books at the above mentioned rate. The payment for the import transaction was made on 5 th April, 2022 when the exchange rate was ` 47 per US Dollar. However, on 31st March, 2022, the rate of exchange was ` 48 per US Dollar. The company passed an entry on 31st March, 2022 adjusting the cost of raw materials consumed for the difference between ` 47 and ` 43 per US Dollar. In the background of the relevant accounting standard, is the company’s accounting treatment correct? Discuss.