Question

Ruth Richter gives a nonprofit entity $25,000 in cash. She tells the entity that it may use the gift for a particular research project but only after it receives at least $20,000 cash from other donors to help complete the project. If the entity fails to raise the additional $20,000, it must return Ruth’s gift. What account should the entity credit when it receives Ruth’s gift but none of her conditions are substantially met?

Answer 1

Answer:

The correct answer is 'Deferred Revenue'.

Explanation:

The Deferred Revenue account relates to the account in which a specific amount of payment is received in advance by the organization for the goods that are not delivered or, for the services which have not been implemented yet. They are shown on the balance sheet of the organization on the liability side.  

Thus, according to the scenario given, the Deferred revenue account will be credited, when the gift is received, but neither of the conditions is met.