6 accountants in a room can't agree on this so I thought I'd open up to 20000.
- Let's say someone lets a charity use a building rent free for 12 months with a market value of 50k
- A gift in kind is created crediting income with 50k (lets call it Fund X ) and a corresponding expense of 50k
- In that same year another donation is received for 50k which must be spent on premises costs (so a restricted fund - let's call it Fund Y)
- no other costs are incurred and no other premises are required.
So at the end of the year the total funds are 50k (50 gift in kind + 50 cash - 50 GIK expense)
What are the individual fund balances at the end of the year?
1) Fund X £0, Fund Y 50k (the fund has been spent against the original income that created the expense)
2 ) Fund X 25K, Fund Y 25K (evenly allocate premises costs across the funds that allow it)
3) Fund X 50K, Fund Y 0K (we can choose which fund to allocate the expense to)
or 4) any combination of the above depending on how you choose to allocate the 50k expense to the funds as they all can be spent on premises costs.