## Monetary Grants Relating to Revenue (Expense Reimbursement)
Revenue grants are received to reimburse operating expenses — salaries, rent, training, etc. Three scenarios exist based on timing.
---
### Scenario A: Grant Reimburses Expenses of One Year
Grant and expenses relate to the same accounting period.
Two alternative presentations (both acceptable):
#### Presentation 1 — Show Grant Separately as Other Income
```
P&L Account:
Salary Expense 90L [Dr]
Other Income (Govt Grant) 30L [Cr]
Net impact: 60L [Dr]
```
Journal:
```
Bank A/c Dr 30L → To P&L (Other Income – Govt Grant) 30L
Salary Exp Dr 90L → To Bank 90L
```
#### Presentation 2 — Deduct Grant Against Expense
```
P&L Account:
Salary Expense (net) 60L [Dr] [₹90L − ₹30L]
```
Journal:
```
Bank A/c Dr 30L → To Salary Expense A/c 30L
Salary Exp Dr 90L → To Bank 90L
```
Both presentations give identical net P&L impact.
---
### Scenario B: Grant Reimburses Expenses of Multiple Years (Lump Sum)
A single lump-sum grant is received upfront for expenses spread over several years.
Treatment: Credit to DGG and release to P&L proportionately each year.
```
Receipt:
Bank A/c Dr [lump sum] → To DGG A/c [lump sum]
Each Year:
DGG A/c Dr [year's share] → To P&L (Other Income) [year's share]
```
Year's share = Total grant ÷ Number of years covered
---
### Scenario C: Grant for Past Expenses Already Incurred
All conditions already fulfilled; no future obligations remain.
Treatment: Treat as Promoter's Contribution → Credit to Capital Reserve
```
Bank A/c Dr [grant] → To Capital Reserve [grant]
```
> Since no future performance is required, the grant is a one-time windfall. Treating it as P&L income would distort profitability. It strengthens the capital base permanently.
---
### Summary of Revenue Grant Scenarios
| Scenario | Grant Coverage | Treatment |
|---|---|---|
| A | One-year expenses | P&L — Other Income or netted against expense |
| B | Multi-year expenses (lump sum) | DGG → release to P&L proportionately |
| C | Past expenses (no conditions left) | Capital Reserve |