In a mixing bowl mix the yeast and water until it dissolves.
Add to the bowl milk, sugar, salt, egg, oil, 1 cup of the flour and mix on low speed for 30 second.
Scrape the sides occasionally and continue beating for 2 minutes.
Stir in remaining flour until smooth and cover with cloth and leave for an hour or until the mixture doubles in volume.
Turn dough onto floured surface, roll dough to 1/2 inch thickness and cut with round cookie cutter.
On floured baking sheets cover the donuts with a cloth and leave for 30-40 minutes until doubles in size.
Heat vegetable oil in deep fryer to 350 degrees.
Place the doughnuts in the hot oil and turn them as they turn golden brown for about 1 minute on each side and strain from oil.
Dust with powdered sugar or spread with chocolate/vanilla glaze as well as coloured sprinkles and serve.