The domestic government of a country recently affected by an earthquake receives medical supplies from another country. The foreign government expects no payment in return, so this transaction has only one entry.

Question

Quizplus · Accepted Answer

This transaction would have two entries in the domestic government's accounting records: one to record the receipt of the medical supplies (an increase in assets) and another to record the donation (an increase in equity or a decrease in liabilities, depending on how the transaction is structured). Even though there's no payment expected in return, the receipt of goods still affects the financial position and must be fully recorded.

The Domestic Government of a Country Recently Affected by an Earthquake