Accountancy Part AAccounts for Non Profit Organsiation

State the accounting treatment of a recurring (maintenance) governmen…

State the accounting treatment of a recurring (maintenance) government grant received by a Charitable Hospital:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Credited to Income & Expenditure Account

Hospitals, schools and colleges depend on government grants for their running. A recurring (maintenance) grant meets the expenses of the current year, so it is a revenue receipt credited to the Income and Expenditure Account. A grant for a specific capital purpose, such as a building grant, would instead be shown on the liabilities side of the Balance Sheet.

Option (2) Debited to Income & Expenditure Account — Incorrect. A grant is a receipt (income), not an expense.

Option (3) Shown as Asset in Balance Sheet — Incorrect. A grant received is not an asset of the organisation in itself.

Option (4) Shown as Liability in Balance Sheet — Incorrect. Only specific (capital) grants are shown on the liabilities side; a maintenance grant is income of the year.

Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), and it is also out of the CUET 2026 syllabus.

NCERT (Pre-rationalised edition):
Some Peculiar Items – “… Government Grant: Schools, colleges, public hospitals, etc. depend upon government grant for their activities. The recurring grants in the form of maintenance grant is treated as revenue receipt (i.e. income of the current year) and credited to Income and Expenditure account.”