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Pragya Madan, an Ex Indian hockey woman player decided to start a hockey academy to train young enthusiastic girls of her village with the support of her family, She started Bright Hockey Academy. On 1st April 2022. Her neighbor Ishwar died and he willed his land to start the academy. Her father 'Ramkumar' spent Rs.20,00,000 for construction of pavilion. 100 young girls joined the academy and they paid yearly of Rs.1,000 each. 10 members paid a single amount Rs.25,000 to get life membership. Hockey and balls purchased during the year amounted to Rs.27,000 Closing stock of these item is nil. Based on the above information you are required to answer the questions.

Treatment of construction of pavilion is

Solution

✅ Correct Option: 1

The pavilion constructed by the father at his expense is effectively a donation in kind (donation of a capital asset). It is added to the Capital/General Fund on the liabilities side (to record the donation) and also shown as a fixed asset (pavilion) on the assets side of the Balance Sheet.

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