Journal entries for donation received by trust

Bank A/c                 Dr

   To Corpus Fund A/c

(Being Donation received for the specific purpose)

Ornaments A/c         Dr

      To Bank A/c 

(Being Ornaments purchased from the Donation received)

Dear devender,

How do you close the corpus fund account. 

There we have to pass an adjustment entry 

Corpus fund account  Dr 

      To  Ornaments account A/c

Originally posted by : Rahul ojha
	Dear sir, Please suggest me journal entry for land donation received by a charitable society

I have the same question?

Correct treatment for an earmarked donation (not corpus):

• On receipt: Dr Bank, Cr "Earmarked Fund – Ornaments" (a restricted fund, not "Corpus Fund"). Corpus is only for donations with a specific direction that they form part of corpus (Sec 11(1)(d)).

• On purchase: Dr Ornaments (fixed asset), Cr Bank. Then transfer: Dr Earmarked Fund – Ornaments, Cr "Capital Fund / Fund utilised for assets". This shows the fund as utilised and keeps the asset funded.

• Tax:

– A voluntary contribution with a specific direction (other than corpus) is income of the trust (Sec 2(24)(iia)), but is applied when spent on the stated object.

– Purchase of a capital asset for the trust's objects counts as application (Sec 11(1)(a)).

– If any earlier donation was a corpus donation, its investment-out-of-corpus rules (Sec 11(1)(d), Explanation) differ.

• Report it in Form 10B/10BB and the ITR-7 schedules correctly.

• Land donation to a society: Dr Land (at fair value), Cr Capital/Corpus Fund if directed as corpus, otherwise Income (voluntary contribution in kind).