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CA Foundation · Accounting · Financial Statements of Not-for-Profit Organisations

Lotus Charitable Trust's Receipts and Payments Account shows a payment of ₹2,40,000 for purchase of furniture on 1 October 2024. The trust depreciates furniture at 10% p.a. on the straight-line basis and charges depreciation only on this new furniture. Also, a donation of ₹1,00,000 was received for the building fund, and a legacy of ₹50,000 was received. What is the net effect of these items on the Income and Expenditure Account surplus for the year ended 31 March 2025 (legacy treated as capital)?

The surplus falls by ₹12,000. Furniture cost is capitalised and only six months' depreciation at 10% on ₹2,40,000 is charged. The building fund donation and the legacy treated as capital go to the Balance Sheet, so they do not affect the Income and Expenditure Account.

  1. ADecrease of ₹12,000Correct
  2. BDecrease of ₹24,000
  3. CIncrease of ₹88,000
  4. DIncrease of ₹1,38,000

Explanation

Furniture purchase is capital, so only depreciation is charged: 2,40,000 × 10% × 6/12 = 12,000. The specific building fund donation and the legacy treated as capital go to the Balance Sheet funds, not to income. Net effect is a decrease of ₹12,000; ₹24,000 ignores the half year.

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