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

A group of local residents sets up an association to run a community sports centre. Any surplus is reinvested in the centre and members elect the committee that runs it. Which of the following types of organisation does this best describe?

This is a member-owned not-for-profit organisation. It serves its members' interests, reinvests any surplus in the sports centre instead of paying it out, and is controlled by a committee the members elect, which is unlike a profit-seeking company, sole trader or government department.

  1. AA public limited company
  2. BA government department
  3. CA member-owned not-for-profit organisationCorrect
  4. DA sole trader business

Explanation

The association is run for the benefit of its members, surpluses are reinvested rather than distributed, and members elect the committee. These are features of a member-owned not-for-profit body. A plc and a sole trader both exist to generate profit for owners, and a government department is part of the state.

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