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CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations

A non-profit hospital trust received a specific donation of Rs 2,00,000 for building a new ward. How should it be treated?

A specific donation for building a new ward is a capital receipt, so it is shown in the Balance Sheet as a fund or added to the Capital Fund. It is not credited to the Income and Expenditure Account because it is not a revenue item of the year.

  1. ACredited to the Income and Expenditure Account as income
  2. BDebited to the Income and Expenditure Account as an expense
  3. CShown as a capital receipt in the Balance Sheet, not in the Income and Expenditure AccountCorrect
  4. DDeducted from subscriptions in the Income and Expenditure Account

Explanation

Donations for a specific purpose, such as building, are capital receipts. They are shown as a separate fund or added to the Capital Fund in the Balance Sheet. Treating them as income would inflate the surplus for the year.

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