Question

A donor gives the Museum, a nonprofit organization, a diary written by an important U.S. leader. The donor has the condition that the diary be used as the Museum's exhibition and that it never be sold. The diary was bought by the donor a few weeks ago at $250,000. How should the museum account for this gift? What are the options and why?

Answer 1

The detailed explanation of the above mentioned question is below :-

First of all Non Profit Organisations are the entities which works not for profit. i.e the working of these organisations are not for profit purpose. Other than this the profit made by these organisations are spent into the business and for the purpose of its own workings only. Such profit cannot be distributed among its directors, managers, or employees as a dividend or through any other sources.

The working of NPO is not for profit but the major source of its income is through donations, which it receives from various donars.

The donations provided by its donars can be of two types :-

1. Specific Purpose Donations :- in this the purpose of donation is defined by the donar and such donation can only be used for that purpose only which is specified .
2. General Purpose Donations :- in this the donations so provided can be used by the organisation for any purpose as it may seems fit.

Here, in the given question the donation so provided by the donar is of specific purpose and such donation can only be used for the purpose as described by the donar.

As the donar gives the Meseum, which is NPO a diary written by an important U.S leader. Also the donar has the condition that the diary be used for the meseum's exhibition and that it never be sold.

The meseum should account this gift as a donation of specific purpose and also should use the donation as prescribed by the donar.

The other options available here is for the donar as this donation worth of $250,000 would help him in his tax deductions and other tax benefits.