Solution
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Example: The Sports Fund has a balance of Rs. 1,00,000 which stands invested as fixed deposit in a bank earning 8% interest. The expenses is incurred towards prizes are Rs. 7,000. In the accounts, it is reflected as follows:The concept of Fund Based Accounting refers to the accounting whereby receipts and incomes relating to a particular fund is credited to that particular fund and payments and expenses are debited to it. Such funds are created for specific purposes such as Building Fund, Library Fund, Sports Fund and Prize Fund etc.
Rs. Sports Fund 1,00,000 Add: Interest earned on deposit 8,000 1,08,000 Less: Expenses for the year 7,000 Show in the liabilities side of balance sheet 1,01,000