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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of a Not-for-Profit Organisation

Which of the following is a feature of a not-for-profit organisation like Delhi Sports Club?

In a not-for-profit organisation the surplus of income over expenditure is added to the capital or general fund instead of being distributed as dividend or profit share. Members do not own profit entitlements, and its main statement is the Income and Expenditure Account.

  1. AIts books are always kept on a single entry basis and need no final statements
  2. BIts surplus of income over expenditure is added to the capital fund rather than distributed as dividendCorrect
  3. CIts owners share the annual profit in proportion to their capital
  4. DIts primary statement of profit is the Trading Account showing gross profit

Explanation

Surplus of income over expenditure in an NPO is transferred to the Capital (General) Fund and not shared among members. NPOs prepare Receipts and Payments Account, Income and Expenditure Account and Balance Sheet. Owners do not share profits, and a Trading Account is not the primary statement.

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