Mr. Farhan, a manager in Not-For-Profit Organisation received a sum off 5,00,000 as donation for construction of building. Mr. Farhan however, used this amount for his personal use.

(i) Identify the value missing in the above case.

(ii) Give the accounting treatment of donation in the financial statements.

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Solution

The value missing in the above case is honesty.

(ii) Donation, if received in small amount is treated as income but if received in large amount, being a capital receipt, is shown in balance sheet in liabilities side.

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The value missing in the above case is honesty. (ii) Donation, if received in small amount is treated as income but if received in large amount, being a capital receipt, is shown in balance sheet in liabilities side.

The value missing in the above case is honesty.

(ii) Donation, if received in small amount is treated as income but if received in large amount, being a capital receipt, is shown in balance sheet in liabilities side.