Asked by Ashley Dominguez on Jun 14, 2024
Verified
If a not-for-profit organization uses the restricted fund method of reporting and has a capital fund, how should a donation of cash restricted to the purchase of land be reported?
A) As revenue in the general fund.
B) As revenue in the capital fund.
C) As a direct increase in net assets in the general fund.
D) As a direct increase in net assets in the capital fund.
Capital Fund
A fund created for the purpose of undertaking capital projects or investing in long-term assets, funded by capital expenditures or external financing sources.
General Fund
The primary operating fund of a government, covering general operations and services not accounted for in special-purpose funds.
Direct Increase
A rise in the value or quantity of something without intervening steps or intermediaries.
- Pinpoint and carry out the accurate accounting approaches for donations, distinguishing between restricted, unrestricted, and endowment contributions.
- Identify the distinctions among fund types in a Non-Financial Public Organization and the specific reporting mandates for each.
Verified Answer
AP
ARCHANA PILLAYJun 14, 2024
Final Answer :
B
Explanation :
When a not-for-profit organization receives a donation of cash specifically restricted for the purchase of land, and it uses the restricted fund method of reporting, the donation should be reported as revenue in the capital fund. This is because the capital fund is used to track resources that are restricted for capital purposes, such as purchasing land.
Learning Objectives
- Pinpoint and carry out the accurate accounting approaches for donations, distinguishing between restricted, unrestricted, and endowment contributions.
- Identify the distinctions among fund types in a Non-Financial Public Organization and the specific reporting mandates for each.