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

In the books of an NPO, the excess of income over expenditure for a year is called:

In a not-for-profit organisation, the excess of income over expenditure is called a surplus, not profit. It is added to the Capital Fund or General Fund in the Balance Sheet and is not distributed among members.

  1. ASurplus, which is added to the Capital FundCorrect
  2. BProfit, which is distributed among members
  3. CDeficit, which is deducted from the Capital Fund
  4. DGross profit, which is carried to the Receipts and Payments Account

Explanation

When income exceeds expenditure in an NPO, the excess is termed surplus and is added to the Capital Fund (General Fund) in the Balance Sheet. Excess of expenditure over income is a deficit, which is deducted from the Capital Fund. Option C describes the opposite situation.

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