In case of capital expenditure,why is the balance of specific fund transferred to capital fund???

Dear Student


Specific Fund represents the amount of fund which is reserved by the organization for a particular specified purpose , When this specific purpose is achieved by the organization , then we have to transfer the amount from specific fund to capital fund because the purpose for which specific fund was created has already been achieved . Consider the example below :
An NPO received Rs 1,00,000/- for Purchasing a land , It created Land Fund for the same . After few days it purchased Land from that money .
Now for the pupose for which this fund was created is achieved so we can’t keep Land Fund as it is in the balance sheet , therefore we transfer it to Capital Fund .
 
Regards

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