Donations are voluntary contributions from individuals, organizations, or government for the NPO's mission. Accounting treatment similar to subscriptions but based on donor promises and receipts. Types: General Donations (for unrestricted use), Restricted Donations (for specific purpose), One-time Donations, Recurring Donations. Recognition: Donations are recognized when there is reasonable assurance of receipt and amount can be measured reliably (in accordance with AS 9 on Revenue Recognition). Donations in cash are recognized immediately upon receipt. Pledges (donor's promise to donate) may be recognized as receivable if sufficiently certain. Treatment in Accounts: Cash donations recognized immediately in I&E Account as income, Pledged donations accrued if reasonably expected to be received, Donations in advance may be deferred to period of intended use. Balance Sheet: Outstanding pledges shown as Current Asset (Donations Receivable), Received but unutilized restricted donations shown as Liability or restricted fund. For Restricted Donations: Maintain separate fund or notation; recognize income only when corresponding expenditure is incurred for the restriction purpose. Related Party Transactions: Donations from members or related parties require separate disclosure. Tax Implications: Donations to eligible NPOs may be tax-deductible for donors; NPO must maintain required registration and compliance. Exam tip: Distinguish between cash donations, pledges, and restricted donations; understand when donations are recognized as income; practice separating restricted from unrestricted donations; handle pledges carefully with appropriateness assessment.