Which entry would be the correct entry on the donor's books to record a gift to a not-for-profit organization when control of the assets is retained by the donor?

Question

Quizplus · Accepted Answer

When control of the assets is retained by the donor, it means that the organization has received a refundable advance, which is a type of liability. Therefore, the correct entry would be to debit "refundable advance to charity," a liability account, and credit "cash" when the gift is received. This way, the organization acknowledges the receipt of the gift, but recognizes that the donor can revoke it at any time, and is therefore not yet a true contribution. Option A is incorrect because it implies that the donation is an expense of the organization, which is not the case. Option C is incorrect because a charitable pledge implies a promise to give in the future, and the donation has already been made. Option D is incorrect because a liability to the beneficiary implies that the organization owes something, which is not the case for a gift with retained control. Option E is incorrect because a refundable advance has not been recognized as a liability.

Which Entry Would Be the Correct Entry on the Donor's