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In this textbook's balance sheets, legacies and life membership fees are:
ACredited to the income and expenditure account
BMerged into the capital fund without any note
CShown as separate lines on the liabilities side
DShown on the assets side as amounts receivable
Answer & Solution
Correct answer: C. Shown as separate lines on the liabilities side
1. Both items are capital receipts, so neither is credited to the income and expenditure account.
2. In this book's worked illustrations they are not absorbed into the capital fund either.
3. Legacies appear as their own line on the liabilities side of the balance sheet, as in the illustrations for a football club and a cricket club.
4. Life membership fees are shown the same way, as a separate liabilities-side line.
5. This is worth noting because several other treatments add both to the capital fund; for this board, follow the book's own practice.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 2 "Accounts of Not-for-Profit Organisation", Illustrations 17, 19 and 20_
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