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

A trust receives a legacy of ₹2,00,000 under a will. Which treatment is generally followed in the final accounts of a non-profit organization?

A legacy is a non-recurring gift under a will, so it is normally treated as a capital receipt and added to the Capital Fund in the Balance Sheet, unless it is clearly stated to be for revenue purposes. It is not credited to Income and Expenditure.

  1. ACredit the full amount to the Income and Expenditure Account
  2. BDeduct it from the expenditure side of the Income and Expenditure Account
  3. CShow it as a capital receipt added to the Capital Fund, unless it is clearly revenue in natureCorrect
  4. DShow it as an outstanding income in the Balance Sheet assets

Explanation

A legacy is a gift received under a will and is non-recurring, so it is normally capitalised by adding it to the Capital Fund. Crediting it to the Income and Expenditure Account would distort the year's surplus.

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