17.) What is endownment fund  ?

 In the word of Eric Kohler.”Endownment  fund is a fund arising from bedquest or gift ,the income of which is devoted for a specificed purpus .”Endownment funds is the money or property given by way of gift by a donor to a non- profit organisation so as to provide a permanent means of support to support the non-trading organisation .

18) State the treatment of endowment fund.

Endowment fund or endownment fund receipt has to be treated as capital receipit   and shown  separately on thir liabilities side of the balance sheet like any special fund.

However,the interest or dividend from the investment of endowment fund is genarally  treated as a genaral income and entered on the credit side of the  income and expenditure account unless there is a stipulation from the donor that the income from the endownment fund should be treated as the income from a special fund .In such a case ,the income from the endownment fund should be addea to the endownment fund on the liabilities side of the balance sheet.

19.) State the need for distiguishing between  capital   

Proper distinction between revenue itemsand capital items is one of the important aspects of correct accounting .As the revenue items should go to the revenue account ,and the capital items should go to the balance sheet, it is necessary to make a proper distinction between revenue items and capital items.If a proper distinction between  revenue items  and capital items is not  made ,the final accounts  will not indicate the correct  financial  position of the concern . For instance ,if sales of buildings are credited to sales account instead of to buildings account,the profict  will be overstanted and the book value of building also will be overstated.Similarly,if repairs to buildings are charged to buildings accounts  intead of to repair accound, the profit will be  overstated and the book value of buildings aslo will be overstated.

  1. State the characterstics of capital receips .
  2. capital recipts are of non-recurring nature ,i.e., they are not received regularly.
  3. capital recipts are not incomes or gains to the concern.
  • Some of the capital receipts like loans borrowed are not liabities.

Some of the examples of capital receipts are:

  1. capital recived from the owers of the business.
  2. Amount received by way of loans or deposits
  • Sale procced of fixed assets and investments.
  1. Non-recurring receipts ,such as life membership fees, legacies,etc.received by anon- trading concern.