Need help in accounting

[Raza7154]

So guys i came across this question and i didn't know the answer to it. Would appreciate if someone could tell me the answer to this.


What is the accounting treatment for gifts received by the company. The gifts can be in the form of assets or shares of another company.

A little scenario: Company A is about to enter in a deal with Company B. Company B, in respect of their deal, gifts Company A a car(for company, not personal use). What would be the accounting treatment in Company A's books for this? And replace the car with shares in Company B. What would it be now?

I would appreciate a quick reply. Thanks folks!

 

[maniji]

when the car is given to company A, it will record it as a tangible asset and depreciate it through its useful life, but in case of shares it will as a asset of invesment on which company a recieve investment income

 

[Raza7154]

i get that but what will be the credit entry? since we are not liable to Company B, we can't set it off against something. And we can't set up something like a "gift reserve" can we? What is the credit entry for this procedure? Btw, thanks for the quick reply mate!

 

[Dr Evil]

Company A's equity will be increased, frankly the answer depends upon the level on which the question is asked. i.e. A-lvls, Bachelors, CA etc. but generally the entry will be:

Dr: Asset
Cr: Equity