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CA Foundation · Accounting · Financial Statements of Not-for-Profit Organisations

In the Balance Sheet of a not-for-profit organisation, the excess of income over expenditure for the year is dealt with by:

The surplus of income over expenditure is added to the Capital Fund (General Fund) in the Balance Sheet, because a not-for-profit organisation has no owners to receive profits, and the surplus increases its accumulated funds. A deficit is deducted from the fund instead.

  1. AAdding it to the Capital FundCorrect
  2. BDeducting it from the Capital Fund
  3. CShowing it as a current liability
  4. DShowing it as an asset on the assets side

Explanation

A surplus in the Income and Expenditure Account increases the accumulated fund of the organisation, so it is added to the Capital Fund. A deficit would be deducted. It is neither a liability nor an asset.

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