Question
What is the appropriate accounting treatment for general
donations and legacies received by a non-profit organization in India?Solution
A charitable institution often received donations, donations may be a general donation or a specific donation. 1.General donation is a donation in which donor does not specify any condition for its use. This account of general donation is accounted as an income and credited to income and expenditure account. 2.Specific donation is a donation where the donor specifies the purpose for which the donation can be used. Specific donations are capitalised and is shown in the liability side of balance sheet. Legacy is the amount received as donation by a Not-for-profit organization under WILL of a deceased person. The donor may or may not specify conditions for its use. In case no conditions are specified it s accounted as general donation and if a specific condition is specified, it is accounted as ‘Specific donation’. In the absence of information in the above question regarding imposing any specific condition by the donor on utilisation of Donation & Legacy amount, it is assumed that they fall in category of general donation and hence will be credited to revenue account i.e., Income and expenditure account. A different point of view may exist regarding this question in books. The Institute of Chartered Accountants of India has also considered this as revenue in CA foundation module: TS Grewal 12th CBSE also advice to treat legacy as a general donation in the absence of conditions specified by the donor. 
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