Tournament Fund, Prize Fund, and Building Fund in NPO Accounts

Special funds in not-for-profit organisation accounts can feel confusing because they look like income, but they are not always treated like ordinary income.

A club may receive money for a tournament. A school association may receive a donation for prizes. A society may receive a grant for a building. In daily language, all of these sound like receipts. In Accountancy, the real question is different:

Was the money received for the general running of the organisation, or was it received for one specific purpose?

That one question decides the treatment.

Once you understand this, tournament fund, prize fund, building fund, sports fund, scholarship fund, and similar items become much easier.

What Special Funds Really Mean

A not-for-profit organisation does not exist mainly to earn profit. It may be a club, school society, sports association, charitable trust, cultural association, or welfare group.

Still, it has to keep proper accounts. It receives money, spends money, owns assets, and prepares final accounts.

Some receipts are general. They can be used for normal expenses such as salaries, rent, printing, postage, repairs, refreshments, stationery, or administration.

Some receipts are specific. The donor, member, government, or organisation itself has linked the money with a particular purpose.

Examples of special funds include:

• Tournament Fund.
• Prize Fund.
• Building Fund.
• Sports Fund.
• Scholarship Fund.
• Library Fund.
• Match Fund.
• Endowment Fund.

If a receipt belongs to one of these funds, it is usually not shown as ordinary income in the Income and Expenditure Account. It is added to that fund and shown in the Balance Sheet.

The Master Rule for Special Funds

The treatment can be remembered through this simple working note:

Particular	Treatment
Opening balance of the fund	Add
Donation, grant, or receipt for that fund	Add
Income from investment of that fund	Add
Expense related to that fund	Less
Closing balance of the fund	Show on liabilities side of Balance Sheet

The closing fund balance is not a normal outside liability like creditors. It is shown on the liabilities side because the organisation has not used that amount for its general purposes. The amount is earmarked.

The idea is accountability. The organisation should be able to show that money received for a specific purpose has not been mixed with ordinary income.

How to Identify a Special Fund in a Question

Look for words that show a restriction or a purpose.

Wording in the question	Likely treatment
Donation for building	Add to Building Fund
Grant for construction	Add to Building Fund
Donation for prizes	Add to Prize Fund
Interest on Prize Fund investment	Add to Prize Fund
Tournament receipts, when Tournament Fund exists	Add to Tournament Fund
Tournament expenses, when Tournament Fund exists	Deduct from Tournament Fund
General donation	Usually income, unless capitalised by instruction
General grant for maintenance	Usually income

The word “for” is very important. Donation for building is different from donation.

Donation by itself may be ordinary income or capital receipt depending on the question. Donation for building is clearly for a specific purpose.

General Donation vs Specific Donation

This is one of the most common areas of confusion.

A general donation is received without a specific restriction. It may be credited to the Income and Expenditure Account unless the question asks for a different treatment.

A specific donation is received for a particular purpose. It is added to the relevant fund.

Item	Treatment
Donation received	Usually Income and Expenditure Account
Donation for prizes	Prize Fund
Donation for tournament	Tournament Fund
Donation for building	Building Fund
Donation for scholarship	Scholarship Fund

The difference is not the word “donation”. The difference is the purpose attached to it.

Tournament Fund

Tournament Fund is created when an organisation sets aside money for a tournament or receives money specifically for tournament activities.

Tournament-related receipts may include:

• Tournament donations.
• Tournament ticket receipts.
• Entry fees for tournament.
• Sponsorship received for tournament.
• Sale of tournament coupons.
• Interest on Tournament Fund investment, if any.

Tournament-related expenses may include:

• Ground rent.
• Match officials’ fees.
• Prize distribution for that tournament.
• Equipment used for the tournament.
• Printing of tickets.
• Refreshments for players.
• Tournament arrangements.

If a Tournament Fund exists, tournament receipts are usually added to the fund and tournament expenses are deducted from it.

Tournament Fund Format

Particular	Amount
Opening Tournament Fund	Rs. …
Add: Tournament donation	Rs. …
Add: Tournament ticket receipts	Rs. …
Add: Interest on Tournament Fund investment	Rs. …
Less: Tournament expenses	Rs. …
Closing Tournament Fund	Rs. …

The closing balance appears on the liabilities side of the Balance Sheet.

Solved Example of Tournament Fund

Suppose a sports club gives the following information:

Item	Amount
Tournament Fund on 1 April	Rs. 50,000
Tournament donation received	Rs. 20,000
Sale of tournament tickets	Rs. 18,000
Interest on Tournament Fund investment	Rs. 4,000
Tournament expenses paid	Rs. 36,000

Prepare the Tournament Fund working note.

Particular	Amount
Opening Tournament Fund	Rs. 50,000
Add: Tournament donation	Rs. 20,000
Add: Sale of tournament tickets	Rs. 18,000
Add: Interest on Tournament Fund investment	Rs. 4,000
Less: Tournament expenses	Rs. 36,000
Closing Tournament Fund	Rs. 56,000

So Rs. 56,000 is shown on the liabilities side of the closing Balance Sheet.

Nothing from this working note is taken to the general Income and Expenditure Account, because the tournament receipts and tournament expenses have been adjusted within the fund.

Prize Fund

Prize Fund is money kept aside for giving prizes. It may be connected with academic prizes, sports prizes, cultural prizes, scholarship prizes, or annual day awards.

Prize Fund questions usually include three types of items:

• Opening Prize Fund.
• Donation for prizes.
• Interest on Prize Fund investment.
• Prizes awarded or prizes distributed.

The usual rule is simple:

Add receipts and income connected with the Prize Fund. Deduct prizes paid or prizes awarded. Show the remaining balance as Prize Fund in the Balance Sheet.

Prize Fund Format

Particular	Amount
Opening Prize Fund	Rs. …
Add: Donation for prizes	Rs. …
Add: Interest on Prize Fund investment	Rs. …
Less: Prizes awarded	Rs. …
Closing Prize Fund	Rs. …

Solved Example of Prize Fund

Suppose a cultural association gives the following details:

Item	Amount
Prize Fund on 1 April	Rs. 25,000
Donation for prizes	Rs. 8,000
Interest on Prize Fund investment	Rs. 3,000
Prizes distributed	Rs. 14,000

Working note:

Particular	Amount
Opening Prize Fund	Rs. 25,000
Add: Donation for prizes	Rs. 8,000
Add: Interest on Prize Fund investment	Rs. 3,000
Less: Prizes distributed	Rs. 14,000
Closing Prize Fund	Rs. 22,000

The closing Prize Fund of Rs. 22,000 appears on the liabilities side of the Balance Sheet.

What If Prize Expenses Are More Than the Fund?

Sometimes prizes distributed are more than the total available Prize Fund.

For example:

Item	Amount
Opening Prize Fund	Rs. 10,000
Donation for prizes	Rs. 2,000
Total amount available	Rs. 12,000
Prizes distributed	Rs. 15,000

The fund can absorb only Rs. 12,000. The extra Rs. 3,000 is treated as a general expense and debited to the Income and Expenditure Account, unless the question gives another instruction.

Particular	Amount
Total Prize Fund available	Rs. 12,000
Less: Prizes distributed	Rs. 15,000
Excess prizes transferred to Income and Expenditure Account	Rs. 3,000

The closing Prize Fund is nil.

This point is important because students sometimes show a negative fund in the Balance Sheet. In most school questions, a negative fund balance is not the expected presentation.

Building Fund

Building Fund is created when money is received or set aside for construction, purchase, extension, renovation, or major improvement of a building.

Common items connected with Building Fund include:

• Donation for building.
• Grant for building.
• Donation for construction.
• Pavilion fund.
• Interest on Building Fund investment.
• Amount spent on construction.
• Amount spent on building extension.

Building Fund is slightly different from Prize Fund or Tournament Fund because the spending often creates a fixed asset.

If prizes are distributed, the benefit is consumed. If a tournament is held, the event is completed. But if a building is constructed, the organisation now owns a building or construction work in progress.

So two things may happen together:

• The Building Fund is reduced by the amount used for construction.
• The building or construction work is shown as an asset.

In many final-account questions, the amount used out of Building Fund is also transferred to Capital Fund, because the organisation has converted restricted money into a fixed asset.

Building Fund Format

Particular	Amount
Opening Building Fund	Rs. …
Add: Donation for building	Rs. …
Add: Grant for construction	Rs. …
Add: Interest on Building Fund investment	Rs. …
Less: Amount spent on building or transferred to Capital Fund	Rs. …
Closing Building Fund, unspent balance	Rs. …

Solved Example of Building Fund

Suppose a club gives the following information:

Item	Amount
Building Fund on 1 April	Rs. 1,50,000
Donation for building	Rs. 60,000
Interest on Building Fund investment	Rs. 8,000
Amount spent on construction of building	Rs. 1,20,000

Working note:

Particular	Amount
Opening Building Fund	Rs. 1,50,000
Add: Donation for building	Rs. 60,000
Add: Interest on Building Fund investment	Rs. 8,000
Less: Amount spent on construction	Rs. 1,20,000
Closing Building Fund	Rs. 98,000

The Balance Sheet treatment will usually be:

Item	Where it appears
Closing Building Fund, Rs. 98,000	Liabilities side
Building or construction work, Rs. 1,20,000	Assets side
Amount used for construction, Rs. 1,20,000	Added to Capital Fund if the question follows fund-transfer treatment

This is why Building Fund needs more care than Prize Fund. Prize Fund mainly affects the fund. Building Fund can affect the fund, the asset side, and Capital Fund.

Sports Fund, Scholarship Fund, and Other Special Funds

The same logic applies to other special funds.

Fund	Add to fund	Deduct from fund
Sports Fund	Sports donations, sports fund interest	Sports expenses, sports equipment expenses if instructed
Scholarship Fund	Scholarship donations, interest on scholarship fund investment	Scholarships paid
Library Fund	Library donations, interest on library fund investment	Library books purchased if instructed
Match Fund	Match receipts, match donations	Match expenses
Endowment Fund	Endowment receipts, income from endowment if restricted	Expenses allowed by the fund terms

Do not learn every fund separately as a new chapter. Learn the rule once, then apply it carefully.

What Happens to Fund Investments?

Sometimes a fund is invested in securities, fixed deposits, or other investments. The investment itself is an asset.

For example, if Prize Fund Investment is Rs. 50,000, it appears on the assets side of the Balance Sheet.

If interest is earned on that investment, the treatment depends on the connection:

Item	Treatment
Prize Fund Investment	Asset side
Interest on Prize Fund Investment	Add to Prize Fund
General investment	Asset side
Interest on general investment	Income and Expenditure Account

The name of the investment matters.

Interest on Prize Fund Investment belongs to Prize Fund.

Interest on Building Fund Investment belongs to Building Fund.

Interest on general investment belongs to general income.

When Does an Item Go to Income and Expenditure Account?

Use this decision table.

Situation	Treatment
No specific fund exists and no restriction is given	Income or expense goes to Income and Expenditure Account
Specific fund exists and receipt is connected to it	Add to fund
Specific fund exists and expense is connected to it	Deduct from fund
Expense is more than fund balance	Excess goes to Income and Expenditure Account
Receipt is for capital project such as building	Add to Building Fund or specific capital fund
Question gives a special instruction	Follow the instruction

This table is useful because questions do not always use the exact same wording.

For example, “sale of tournament tickets” may be tournament income if Tournament Fund exists. But if no Tournament Fund exists, and the question is simply preparing an Income and Expenditure Account, it may be treated as income from the tournament.

The account treatment follows the context.

Full Mini Example With Three Special Funds

Let us take one combined example.

The following information is given for Bright Future Club for the year ended 31 March:

Item	Amount
Tournament Fund on 1 April	Rs. 40,000
Prize Fund on 1 April	Rs. 18,000
Building Fund on 1 April	Rs. 2,00,000
Tournament donations	Rs. 12,000
Sale of tournament tickets	Rs. 16,000
Tournament expenses	Rs. 30,000
Donation for prizes	Rs. 7,000
Interest on Prize Fund investment	Rs. 2,000
Prizes distributed	Rs. 20,000
Donation for building	Rs. 80,000
Building Fund investment interest	Rs. 10,000
Amount spent on construction	Rs. 1,50,000

Tournament Fund Working Note

Particular	Amount
Opening Tournament Fund	Rs. 40,000
Add: Tournament donations	Rs. 12,000
Add: Sale of tournament tickets	Rs. 16,000
Less: Tournament expenses	Rs. 30,000
Closing Tournament Fund	Rs. 38,000

Prize Fund Working Note

Particular	Amount
Opening Prize Fund	Rs. 18,000
Add: Donation for prizes	Rs. 7,000
Add: Interest on Prize Fund investment	Rs. 2,000
Less: Prizes distributed	Rs. 20,000
Closing Prize Fund	Rs. 7,000

Building Fund Working Note

Particular	Amount
Opening Building Fund	Rs. 2,00,000
Add: Donation for building	Rs. 80,000
Add: Building Fund investment interest	Rs. 10,000
Less: Amount spent on construction	Rs. 1,50,000
Closing Building Fund	Rs. 1,40,000

Now the Balance Sheet will show:

Liabilities side	Amount
Tournament Fund	Rs. 38,000
Prize Fund	Rs. 7,000
Building Fund	Rs. 1,40,000

The asset side will also show the building or construction work of Rs. 1,50,000, if it has not already been included elsewhere in the question.

If the question follows the fund-transfer method, Rs. 1,50,000 will also be added to Capital Fund because the building has been created from the Building Fund.

A Fast Method for Exam Questions

When you see special funds, use this order:

1. Write the name of every special fund in rough work.
2. Put the opening balance under that fund.
3. Add receipts that clearly belong to the fund.
4. Add income from investment of that fund.
5. Deduct expenses related to the fund.
6. If expenses exceed the fund, transfer the excess to Income and Expenditure Account.
7. Show the closing fund on the liabilities side.
8. Show any fund investment or asset purchased on the assets side.
9. For Building Fund, check whether the used amount must be transferred to Capital Fund.

This order prevents most mistakes.

Working notes make the final answer cleaner and easier to check.

Common Mistakes to Avoid

The first mistake is treating every receipt as income. A donation for a specific purpose is usually not ordinary income.

The second mistake is treating every payment as an expense. If a payment is connected with a special fund, adjust it against the fund first.

The third mistake is adding interest on a specific fund investment to general income. If the investment belongs to the fund, the interest usually belongs to the fund.

The fourth mistake is forgetting the asset side. Building Fund may create a building. Library Fund may create library books. Sports Fund may create sports equipment if the question asks for that treatment.

The fifth mistake is showing a negative special fund. If the expense is more than the fund, the excess usually goes to the Income and Expenditure Account.

The sixth mistake is ignoring the wording of the question. Special fund treatment depends heavily on words such as “for”, “towards”, “fund”, “specific”, and “investment of fund”.

Quick Revision Table

Item	Usual treatment
Opening special fund	Liabilities side, add in fund working
Donation for a fund	Add to that fund
Interest on fund investment	Add to that fund
Expense related to fund	Deduct from that fund
Closing special fund	Liabilities side
Fund investment	Assets side
Expense more than fund	Excess to Income and Expenditure Account
Building construction from Building Fund	Show building as asset and adjust Building Fund
General donation	Income, unless question says otherwise

The Core Idea

Special funds are not difficult once you stop treating them as random receipts and payments.

They are promises.

Money received for prizes should support prizes. Money received for a tournament should support the tournament. Money received for a building should support the building.

That is why the accounting treatment keeps each fund separate.

When you read the question with this idea in mind, the format becomes logical. Add what belongs to the fund, deduct what is used for that purpose, show the balance properly, and check whether an asset has also been created.

Frequently Asked Questions

Is Tournament Fund shown in the Income and Expenditure Account?

Usually, no. If a Tournament Fund exists, tournament receipts are added to the fund and tournament expenses are deducted from the fund. Only the excess expense, if the fund is not enough, is taken to the Income and Expenditure Account.

Where is Prize Fund shown in the Balance Sheet?

The closing Prize Fund balance is shown on the liabilities side of the Balance Sheet. If there is a Prize Fund Investment, that investment is shown on the assets side.

Is donation for building treated as income?

Usually, no. Donation for building is for a specific capital purpose, so it is added to Building Fund. If the question gives a special instruction, follow that instruction.

What is the treatment of interest on Prize Fund investment?

Interest on Prize Fund investment is added to Prize Fund. It is not treated as general income because the investment belongs to that specific fund.

What happens if prizes paid are more than Prize Fund?

The available Prize Fund is used first. The extra amount is treated as an expense in the Income and Expenditure Account, unless the question gives another instruction.

Does Building Fund appear even after construction starts?

Yes, if some fund balance remains unspent, it appears as Building Fund on the liabilities side. The building or construction work is shown on the assets side. In many questions, the amount used for construction is also transferred to Capital Fund.

What is the easiest way to solve special fund questions?

Prepare a separate working note for each fund. Add fund-specific receipts, add fund-specific investment income, deduct fund-specific expenses, and then place the closing balance in the Balance Sheet.