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

Shree Vidya Trust, a charitable trust, received Rs 5,00,000 from a donor with a written condition that it must be used only to build a library block. The trust has not yet started construction. How should the trust treat this receipt in its financial statements as per the usual not-for-profit accounting approach?

The Rs 5,00,000 should be shown as a restricted or earmarked fund in the Balance Sheet, because the donor tied it to a library block. It is recognised in income only as it is spent for that purpose, not as general income in the year of receipt.

  1. ACredit it to the Income and Expenditure Account as general income of the year
  2. BShow it as a restricted (earmarked) fund in the Balance Sheet until utilised for the stated purposeCorrect
  3. CTreat it as a loan repayable to the donor
  4. DIgnore it until construction is completed

Explanation

A donation received for a specific purpose is a restricted or earmarked fund. It is shown in the Balance Sheet and recognised as income only as it is utilised for the stated purpose. Crediting it as general income ignores the donor's condition.

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