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

In the books of a club, a donation received for a specific purpose, such as constructing a new pavilion, is treated in the final accounts as:

A donation received for a specific purpose, such as building a pavilion, is a capital receipt. It is not shown as income of the year but is added to a specific fund or the Capital Fund on the liabilities side of the Balance Sheet.

  1. AAn income in the Income and Expenditure Account of the year
  2. BA capital receipt added to the Capital Fund or a specific fund shown on the liabilities sideCorrect
  3. CA deduction from the expenses in the Income and Expenditure Account
  4. DAn asset shown on the assets side of the Balance Sheet

Explanation

Donations given for a specific purpose are capital receipts. They are not credited to the Income and Expenditure Account but are carried to a specific fund or the Capital Fund in the Balance Sheet. Treating them as revenue income would overstate the surplus for the year.

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