Question 1 (c)
Treatment of donations, legacies, tournament fund, entrance fees and life membership fees
5.33 marks
- Time to write
- About 11 minutes
From an older CBCS paper
Question
Question 1 (c) · 5.33 marksQ.1 (c) In the Financial Statements of not-for-profit organizations, what treatment will you give to Donations, Legacy, Tournament Fund, Entrance Fees and Life Membership Fees? [5.33 Marks]
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
What the paper leaves open
The paper prints only the total marks. The split below is ours.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Donations 1.3 marks 2 min
- 2 Legacy 1 mark 2 min
- 3 Tournament Fund 1 mark 2 min
- 4 Entrance fees 1 mark 2 min
- 5 Life membership fees 1 mark 1 min
- Check: every ask answered, key terms underlined 1 min
Try it first. About 11 minutes for 5.33 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
| Item | Treatment in the financial statements of a not-for-profit organisation |
|---|---|
| Donations | A donation received for a specific purpose (building, library) is capitalised: credited to that fund and shown on the liability side of the balance sheet. A general donation is income and is credited to the Income and Expenditure Account. |
| Legacy | An amount received under a will. Being non-recurring it is not income: it is added to the capital fund (liability side). A legacy of a small amount may be treated as income. |
| Tournament Fund | A specific fund: receipts for tournaments (subscriptions, donations) are added to the fund and tournament expenses are deducted from it, not taken to the Income and Expenditure Account; the balance is shown on the liability side. If tournament expenses exceed the fund, the excess is charged to the Income and Expenditure Account. |
| Entrance fees | Two views: being paid once by each member, they may be capitalised (added to the capital fund); or, because new members join every year, treated as income. Without a specific instruction either may be adopted, with a note justifying it. |
| Life membership fees | Paid once to cover a member's whole life, they are not of a recurring nature: credited to a Life Membership Fund or capital fund on the liability side, not to the Income and Expenditure Account. Some organisations transfer a part each year to income, spread over the expected membership period. |
Where the 5.33 marks sit
A suggested split of the printed 5.33 marks; the paper gives only the total.
| # | Component | Marks |
|---|---|---|
| 1 | Donations | 1.33 |
| 2 | Legacy | 1 |
| 3 | Tournament Fund | 1 |
| 4 | Entrance fees | 1 |
| 5 | Life membership fees | 1 |
| Total | 5.33 |
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