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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of a Not-for-Profit Organisation

A society received a donation of Rs 5,00,000 specifically for constructing a new hall, and a general donation of Rs 40,000. Entrance fees of Rs 20,000 were received, which the society's rules require to be capitalised. In the balance sheet, these are treated as:

The hall donation and the capitalised entrance fees go to the balance sheet, as a specific fund and an addition to the accumulated fund respectively. The general donation is revenue income, credited to Income and Expenditure, because it has no specific or capital purpose.

  1. AAll three are shown as income in Income and Expenditure Account
  2. BHall donation and entrance fees are added to the capital/specific fund; general donation is treated as revenue incomeCorrect
  3. CHall donation is revenue income; the other two are capitalised
  4. DOnly entrance fees are added to the accumulated fund; both donations are income

Explanation

Specific-purpose donations are capital receipts shown in the balance sheet as a fund or added to the building. Entrance fees capitalised per rules go to the accumulated fund. A general donation is usually treated as revenue income unless stated otherwise.

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