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Subsidy received in the nature of promoters' contribution from the Central Government — which statements are correct per AS 12? (i) Not considered deferred income; (ii) Not distributable as dividend; (iii) Treated as capital reserve; (iv) Treated as deferred income.
A(ii) and (iii)
B(iii) and (iv)
C(i), (ii) and (iii)
D(i) and (ii)
Answer & Solution
Correct answer: C. (i), (ii) and (iii)
1. Step 1: AS 12 specifies that grants in the nature of promoters' contribution are credited to capital reserve, NOT recognised in profit and loss as deferred income.
2. Step 2: Hence (i) "not deferred income" and (iii) "treated as capital reserve" are correct.
3. Step 3: Capital reserves are not freely distributable as dividend, so (ii) is also correct. (iv) is wrong.
_Source: ICAI BoS CA Inter Paper 1 Practice MCQ Paper (89270bos-aps3012-int-p1), Q.7_