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ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation

A charity runs shelters for homeless people and measures its success by the number of people housed per year and by the quality of its fundraising stewardship. Which statement best describes the purpose of this type of organisation?

A charity exists to benefit a cause, here homeless people, and money is only a means to that end. It has no shareholders and does not distribute surplus to trustees, and it is funded mainly by donations rather than taxation, so its primary aim is non-financial.

  1. AIt exists to maximise surplus distributed to its trustees
  2. BIt exists to provide benefit to a cause, with finance being a means rather than the main aimCorrect
  3. CIt exists to maximise shareholder wealth through donations
  4. DIt exists to deliver public services funded entirely from taxation

Explanation

Not-for-profit organisations such as charities exist to achieve a social or cause-related aim. Funds raised are a means to deliver that aim, not the aim itself. Trustees do not take surplus, there are no shareholders, and charities are funded by donations rather than being tax-funded public bodies.

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