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CA Foundation · Accounting · Financial Statements of Not-for-Profit Organisations

A club had a match fund of ₹50,000 created from a specific donation for matches. During the year, match expenses of ₹35,000 were incurred. How should the expense be treated?

Match expenses of ₹35,000 are deducted from the match fund, which then stands at ₹15,000 in the Balance Sheet. They are not charged to the Income and Expenditure Account, because the specific fund exists to meet them.

  1. ADebit to the Income and Expenditure Account and leave the fund unchanged
  2. BDeduct from the match fund in the Balance Sheet, with no charge to the Income and Expenditure AccountCorrect
  3. CAdd to the Capital Fund
  4. DShow as an asset in the Balance Sheet

Explanation

Expenses met out of a specific fund are adjusted against that fund. The fund shows ₹15,000 in the Balance Sheet, and the expense does not appear in the Income and Expenditure Account. Debiting the expense to Income and Expenditure as well would count it twice.

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