Question

Show that the treatment of items of Income and Expenditure Account when there is a specific fund for those items.

Answer 1

In case of an NPO there may be a variety of receipts out of these some receipts are for specific purpose and some are for general purpose Receipts which are for specific purpose can be utilised for specific purpose only and the other receipts can be used for any purpose. e.g. if donation is received for tournament, then this donation is a specific donation and thereby can only be used for organising the tournament. That's why specific receipts are not considered as revenue income for the NPO and hence are not shown in the Income and Expenditure Account.
In fact, such receipts are considered as liabilities to the NPO as these amounts are received for specific purpose and cannot be used for any other purpose. Specific receipts are shown in the liabilities side of the Balance Sheet, until and unless they are fully set off against the purpose for which they are received. On the other hand, if these amounts are invested outside organisations ( in the form of shares, debentures, etc.), then these are called funds like, tournament fund, match funds, prize fund, etc.
The interest and income earned on such investments are not credited to the Income and Expenditure Account but in fact are credited to the respective Fund Account. Similarly, the expenses incurred for such funds are not debited to the Income and Expenditure Account but, in fact, are debited to the respective Fund Account. These special funds are shown in the related expenses exceed the related receipts of the fund, then only the difference is shown in the income and Expenditure Account.
Treatment
Tournament Fund Account

Date	Particulars	JF	Amt.(Rs.)	Date	Particulars	JF	Amt.(Rs.)
	Expenses (Expenses incurred like, match expenses, tournaments expenses) Balance c/d				Balance b/d Incomes (incomes or interest earned on funds invested in the form of donation investments, dividends, etc) Income and Expenditure A/c

Clarification (1)
If the receipts exceed the expenses for specific purpose then the difference between the two is shown in the Liabilities side of the Balance sheet.
Balance Sheet

Specific Funds (i.e.Tournament, Match, Prize Fund, etc.)

Tournament Fund Investment

Clarification (2)
If the expenses exceed the receipts for the specific purpose then the difference between the two is shown in the Expenditure side of the Income and Expenditure Account.
Income and Expenditure Account

Expenditure	Amt.(Rs.)	Income	Amt.(Rs.)
Expenses (i.e., Tournament, match, Prize expenses, etc. except capital expenditure like, i.e. expenses on construction of building)