Interest earned on prize fund investments should be:

1. A specific fund and its investments are kept separate from the general working of the organisation. 2. The textbook states that incomes and expenses relating to a specific fund must not be recorded in the income and expenditure account. 3. Incomes relating to the fund are added to the fund account, and expenses relating to it are subtracted from the fund account, in the balance sheet. 4. So interest on prize fund investments is added to the prize fund on the liabilities side. 5. Note that ordinary interest on investment, not tied to any fund, is a revenue receipt and does enter the income and expenditure account. _Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 2 "Accounts of Not-for-Profit Organisation", §2.5.4(c)_