How to Record Grants Receivable

by Paul Merchant; Updated September 26, 2017

Grants refer to awards of money or direct assistance given to deserving individuals or organizations with an aim of promoting or achieving certain goals or objectives. It is very important to have well maintained records for all the grant funds you receive. Proper recording of grants receivable ensures accountability, accuracy of records, transparency and integrity. Receivable grants must be recorded in accordance with the generally accepted accounting principles (GAAP).

Step 1

Record grants receivable as assets at their specified value, or in the absence of a specified value, record them at their fair market value. Grants receivable as assets refer to grants of fixed assets (assets that are not easily convertible into cash e.g. land or buildings) or financial assistance for the purchase, construction or other acquisition of such assets. These grants normally come with a specified value from the donor that may be lower or higher than its fair market value. If the specified value differs from the fair value, record the fair value as the value of the grant asset.

Step 2

Depreciate grants, like motor vehicles.Record grants receivable as depreciable assets as income over their period of depreciation and in the proportions in which depreciation on those assets is charged. For example a motor vehicle received as a grant should be recorded as having been depreciated over four years if its depreciation rate is at 25 percent per annum.

Step 3

Recognize and record grants related to income as a credit in the income statement. These grants refer to grants received for compensating expenses that have already been incurred, income not yet earned from the current and previous reporting period and any other grants that are not attributable to fixed assets. They should be recorded only when they have been received or when you have received a confirmation that they will be received.

Step 4

Record grants meant to reimburse expenses as having been used during the period in which they were incurred. For example grant funds received in May 2011 for expenses incurred in January 2011 should be recorded as having been used in January 2011 and not May 2011 when they were received. Grants received for compensating unearned income should be recorded as having been used to the estimated amount of unearned income for the specified period.

Step 5

Separate accounting records for individual grants within your accounting system to effectively and efficiently track and monitor grants receivable. Track all expenditures related to the grant by recording all payments and expenses related to the grants received.

Step 6

Create physical files for each grant. File all invoices and other documents such as payment vouchers in their respective grant files. This helps in documenting all the transactions of individual grants as well as storing documents for future reference.

Tips

  • Consult an accountant to help you in recording your grant funds in accordance with the International Accounting Standards and the Generally Accepted Accounting Principles.

    Record grants receivable only when you are sure that they will be received.

    Comply fully with all the reporting conditions of the grantor.

About the Author

Paul Merchant started writing in 2005. His articles have appeared in “JSTOR Journals” and “Wileys Management Journals.” He is a certified public accountant and a qualified project management expert. Merchant holds a Bachelor of Arts in communication from the University of Nairobi.