Donation received for a specific purpose should _________________.

Be credited to a separate account and shown on the liabilities side of the balance sheet

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Be credited to income and expenditure account

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Not be recorded at all

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Be debited to income and expenditure account

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Solution

The correct option is C Be credited to a separate account and shown on the liabilities side of the balance sheet
Donation received for a specific purpose is to be utilized for the specific activity. This kind of donations are capital receipts and to recorded separatly. It should be kept in a separate account and expense to be reduced from this account only. Balance of this account to be shown as liability in the balance sheet.

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