How the following items of prize fund will be shown in balance sheet:

Liabilities: Prize fund ₹82,000 ; Assets: Prize fund investment ₹80,000

The correct answer is Option (3) → Liabilities: Prize fund ₹82,000 ; Assets: Prize fund investment ₹80,000.

* Prize fund investment are shown on the asset side as they are the investments of the company.
* Prize fund = 80000
Add:  Income from prize fund investment = 8000
Less: Prizes awarded = 6000
= (80000 +8000 -6000)
= 82000
₹82000 WILL BE SHOWN IN THE LIABILITIES SIDE OF BALANCE SHEET.

The Not-for-Profit Organisations office create special funds for certain purposes/activities such as 'prize funds', 'match fund' and 'sports fund', etc. Such funds are invested in securities and the income earned on such investments is added to the respective fund, not credited to Income and Expenditure Account. Similarly, the expenses incurred on such specific purposes are also deducted from the special fund. For example, a club may maintain a special fund for sports activities. In such a situation, the interest income on sports fund investments is added to the sports fund and all expenses on sports deducted therefrom. The special funds are shown in balance sheet. However, if, after adjustment of income and expenses the balance in specific or special fund is negative, it is transferred to the debit side of the Income and Expenditure Account or adjusted as per prescribed directions.