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

Maple Social Club received a legacy of ₹3,00,000 during the year, with no condition attached except that it is to be used for the club's general purposes. Its correct treatment in the Balance Sheet is:

The legacy is a non-recurring capital receipt, so it is added directly to the Capital Fund in the Balance Sheet. It is not credited to the Income and Expenditure Account, as that would wrongly inflate the year's surplus with a receipt that will not recur.

  1. AAdded directly to the Capital FundCorrect
  2. BCredited to the Income and Expenditure Account as ordinary income
  3. CShown as a current liability
  4. DDeducted from the fixed assets

Explanation

A legacy is a non-recurring receipt of a capital nature, so it is added directly to the Capital Fund and not routed through Income and Expenditure. Treating it as income (option 2) would wrongly inflate that year's surplus.

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