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Questions
All donations received by non-trading concerns are entered in the liabilities side of the balance sheet. Justify either for or against.
Justify for or against:
All donations received by non-trading concerns are entered in the liabilities side of the balance sheet.
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Solution
Against:
- All donations received by non-trading concerns are not entered on the liabilities side of the balance sheet.
- Only specific types of donations, such as those received for a specific purpose or with certain conditions attached (restricted donations), are recorded as liabilities until the conditions are fulfilled.
- General donations, which are meant to support the organization's overall activities, are recorded as income in the Income and Expenditure Account and, if unspent, may appear on the assets side as part of the accumulated funds or reserves.
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