CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations
Which of the following best describes the primary objective of a non-profit organization such as a charitable club or society?
A non-profit organization's primary objective is rendering service to its members or society, not earning profit for distribution. Any surplus is used to further its objects, such as sports, education or charity, rather than shared among members as owners would share profit.
- ARendering service to its members or society without aiming at profit distributionCorrect
- BMaximising profit for distribution among its owners
- CEarning a fixed return on capital for each member
- DSelling goods at a mark-up to build up shareholders' wealth
Explanation
A non-profit organization exists to serve its members or the community, such as through sports, education or charity. Any surplus is applied to its objects and not shared among members. Profit maximisation for owners is the objective of a trading business, so the other options are wrong.
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