Question

Which of the following is correct treatment of legacy received by non-profit organization?

• A. It appears on the credit side of the income and expenditure account. It should be treated as a revenue item as it is of recurring nature.
• B. It appears on the credit side of the receipts and payments account. It should be capitalized being an item of non-recurring nature and should be shown on the asset side of the balance sheet.
• C. It appears on the debit side of the receipts and payments account and on the credit side of the income and expenditure account.
• D. It appears on the debit side of the receipts and payments account. It should be capitalized, being an item of non-recurring nature.

Answer 1

The correct option is D It appears on the debit side of the receipts and payments account. It should be capitalized, being an item of non-recurring nature.

Legacy is generally shown on the debit side of receipts and payments accounts. Legacy is the property received by virtue of a will of a person or after his death. Its a capital receipt and hence would not appear in income and expenditure account and will be added to the capital in Balance sheet. It should be capitalised being an item of non-recurring nature.