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CS Professional · CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Kalyan Sewa Samiti, a registered society, received ₹10,00,000 as a restricted grant for a health camp and spent ₹7,00,000 on it during the year. The treasurer proposes to show the whole ₹10,00,000 as income of the year and to hide the unspent balance in general reserves. Which view best reflects sound reporting and transparency?

Only the ₹7,00,000 actually utilised should be recognised as income. The unspent ₹3,00,000 of the restricted grant should be shown as an unutilised grant or earmarked fund and disclosed, because it must be applied to the specified purpose and cannot be merged into general reserves.

  1. AShow only the utilised ₹7,00,000 as income and carry ₹3,00,000 as an unutilised grant liability or earmarked fund, disclosing itCorrect
  2. BTreat the entire grant as income because it was received in cash
  3. CIgnore the unspent amount since the society is not a company
  4. DTransfer the unspent ₹3,00,000 to the treasurer's personal account for safekeeping

Explanation

A restricted grant must be used for the stated purpose; the unspent part is not free income and is shown as a liability or earmarked fund with disclosure. Treating it all as income, as in option B, overstates surplus and misleads donors and may breach grant conditions.

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