Expert: Arthur Naman - 4/14/2009

Question
We are a small not for profit with an endowment portfolio.  We received proceeds from class action law suites.  I will debit cash and was wondering what the other side of thi entry is. Investment income?

Answer
I would not expect the credit to be an investment income account. Investment income would be the account to credit if you receive interest or dividends on your investments.

Assuming that your non-profit is not initiating the lawsuit, but are only receiving the proceeds from successful lawsuits initiated by other people or corporations, then you are receiving contributions.

Whatever the case, I would think that you should credit some kind of "income" account --  contributions, grants, etc.

Also, who is doing your annual financial statements or tax return, consider asking that person.