Do-Good Inc. is a not-for-profit organization that was formed on January 1, 2020. Do-Good has a December 31 year end. It has an accounting policy of capitalizing and amortizing its capital assets. On April 1, 2020, Do-Good purchased equipment costing $8,000. The equipment is estimated to have a useful life of 4 years, with no residual value at that time. This transaction was the only transaction that took place to date. The equipment was purchased from an unrestricted contribution of $8,000.
In which fund would the purchase of the asset be recorded?

Question

Quizplus · Accepted Answer

The purchase of the equipment is a capital asset and should be recorded in the capital fund as per the accounting policy of the organization. The general fund is used for the organization's general operating activities, while the operating fund is used for day-to-day expenses. The endowment fund is for long-term investments, and the purchase of equipment does not fall under this category. Therefore, the correct choice is C, the capital fund.