Endowment

Accounting Dictionary

Endowment

Most endowments are assets donated to a non-profit organization to be used for a charitable purpose.

It is common for these endowments to specify that the principal will stay intact and only the yearly income will be spent. For example, Marcie gave $1,000,000 in stock to her local community college. The terms of her gift specify that the $1,000,000 may never be spent but the $40,000 in yearly dividends should be used to award scholarships. Some endowments specify that the principal may be spent at a certain time. Marcie also set up a private endowment for her granddaughter that specified that in 18 years the income and principal could be spent for college expenses.

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