— Kishore V, SME and ACW at Edumarz.
Treatment of items of Income and Expenditure Account when there is a specific fund for those items:
- The office of Not-for-Profit Organizations creates special funds for certain purposes/activities, such as ‘prize funds, “match funds,’ and sports funds,’ among others.
- The money received on such investments is added to the corresponding fund, not credited to the Income and Expenditure Account, and such funds are invested in securities.
- Expenses incurred for such specified reasons are taken from the special fund in the same way. A club, for example, may keep a separate fund for sporting activities.
- In this case, the interest earned on sports fund investments is added to the sports fund, and all sports-related costs are subtracted.
- The balance statement includes the special funds.
- If the amount in a specialised or special fund is negative after income and expenditure adjustments, it is moved to the debit side of the Income and Expenditure Account or changed as directed.
Demonstrate how you would handle the following things in a Club’s financial statements:
Details | Debit Amount | Credit Amount |
Prize fund Prize fund investment Income from Prize fund investments Prizes Awarded | 80,000 6,000 | 80,000 8,000 |
Solution:
Liabilities | Amount | Amount | Assets | Amount | Amount |
Prize Fund Add: Income Less: Awarded | 80,000 8,000 ====== 88,000 6,000 | 82,000 | Prize fund Investment | 80,000 |