Donated assets

When a non-profit organization receives a fixed asset (like a truck) as a donation, it should be recorded in the financial statements at its Fair Market Value (FMV) at the time of receipt.

Here is the standard accounting treatment:

1. Journal Entry

You should recognize the asset and a corresponding income (or capital reserve):

• Debit: Asset Account (Truck) — ₹7,00,000

• Credit: Capital Reserve / Donation Income — ₹7,00,000

Note: In many non-profit accounting frameworks, this is often credited to a "Capital Fund" or "Donation Account" rather than a regular revenue account, depending on your local accounting standards (such as IND AS or AS for NPOs).

2. Presentation in Financial Statements

• Balance Sheet:

  • The truck should be shown under Fixed Assets at ₹7,00,000.

  • If you have a Capital Fund, the amount may be added to the fund on the liabilities side to reflect the restricted or capital nature of the donation.

• Income and Expenditure Account:

  • Generally, donations of fixed assets are not treated as revenue in the Income and Expenditure account. However, if the asset is capitalized, you will charge depreciation on the ₹7,00,000 value annually through the Income and Expenditure account over the useful life of the truck.

Summary

To record the donation of a truck valued at ₹7,00,000, debit the asset account for ₹7,00,000 and credit a Capital Fund or Capital Reserve. The asset is then reported on the Balance Sheet and depreciated over its useful life in the Income and Expenditure account.