Accountancy Part AAccounts for Non Profit Organsiation

A fund arising from a bequest or gift, the income of which is used fo…

A fund arising from a bequest or gift, the income of which is used for a specific purpose, is termed as __________.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Endowment Fund

An endowment fund is built from a bequest (a gift by will) or a gift whose income is to be used for a stated purpose. The fund itself is a capital receipt and is shown on the liabilities side of the Balance Sheet.

Option (2) Legacies — Incorrect. A legacy is the amount received under a will; it is not a fund whose income is kept for a purpose.

Option (3) Government Grant — Incorrect. A grant comes from the government, not from a bequest or private gift.

Option (4) Special Fund — Incorrect. Special funds (prize fund, sports fund) are a general group; a fund from a bequest or gift whose income serves a purpose has its own name, endowment fund.

Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), but it is still in the CUET 2026 syllabus, so do not skip it.

NCERT (Pre-rationalised edition):
Endowment Fund – “… It is a fund arising from a bequest or gift, the income of which is devoted for a specific purpose. Hence, it is a capital receipt and shown on the Liabilities side of the Balance Sheet as an item of a specific purpose fund.”