Question

Which of the following terms is used to indicate that a donor provided a gift with explicit instructions that the gift is to be used for a specific purpose by the not-for-profit but the entire amount may be spent right away? A. Net assets with donor restrictions. B. Permanently restricted net assets. C. Endowment assets. D. Net assets without donor restrictions.

Answer 1

In the given case a donor has provided a gift with the explicit instructions that the gifts is to be used for a specific purpose by the not for profit entity, This statement only clearly indicates that the the gift given by the donor has a specific restriction to be used for the specific purpose.

Earlier the restricted net assets were devided in the permanent and temporary net assets but with the ammendment in the law both the cataegories are classified in the net assets with donor restriction. For permanently restriction the assets to be kept in perpectuity this is not with the given case as it is mentioned that the amount can be spent rightaway.

Here the answer can not be endowment assets as this assets are donated with as a principal with an intention to grow and fetch interest or income from it direct use for it is not allowed.

Further it is also not the net assets withot donors restriction as specific purpose use is stated while donation.

Thus the correct option -----------A i.e Net Assets with donors restrictions.