Khelo India sports Club started the activity of searching and nurturing sports talent from village levels of the country. For this initiative, Mr. David a renowned industrialist donated Rs. 50,00,000 on 1st July 2020, for the construction of a new hostel and mess for upcoming sportsmen. Besides this Mr. David offered the services of his personal chartered accountant, free of charge, to streamline the account of Total Sports Club. The chartered accountant visited the office of the Non-profit organization (NPO) on 31st March 2021 and found that till date Rs. 35,00,000 had been spent on construction of hostel and mess building. He also noted that the NPO had a capital fund of Rs. 1,20,00,000 in the beginning of the year. Other important points that he noted were that NPO had 2000 regular members each having an annual subscription of Rs.2000 per annum. On 1stApril 2020, 180 members had not paid for subscription of previous year and 20 members had paid for 2020-2021 in advance (out of which 5 had paid advance of 2021- 2022 as well) 31st March 2021, 110 Members had outstanding balance (including 50 who had not paid for 2019-20 as well) and 25 members had paid for 2021- 2022 in advance (including all 5 who had paid in advance in 2019-20). Since the accountant of NPO was not clear about how to deal with all the above information he drafted a set of questions for guidance. Considering that you are the Chartered Accountant of Mr. David answer the following questions based on the information detailed above.

Where should the amount of Rs. 35,00,000 spent on construction of building be reflected?

Reflected on debit side of income and expenditure account as an expense. Not be recorded till the building is complete. Reflected as a deduction from Building fund and addition to capital fund None of the above

Reflected as a deduction from Building fund and addition to capital fund

Expenses related to specific funds are first adjusted from available fund.