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CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations

Which of the following is a feature that distinguishes a non-profit organization from a sole proprietary trading business?

The distinguishing feature is that a non-profit organization does not distribute its surplus among members; it keeps it to further its objects, adding to the capital fund. Keeping a cash book, balance sheet or double entry is common to trading businesses as well.

  1. AIt keeps a Cash Book to record receipts and payments
  2. BIts surplus is not distributed among members and is retained to further its objectsCorrect
  3. CIt prepares a Balance Sheet at the year end
  4. DIt records transactions using double entry

Explanation

Both kinds of entity may keep a cash book, a balance sheet and double entry, so these do not distinguish them. The distinguishing feature is that a non-profit's surplus is not shared among members but is applied to its objects. The excess of income over expenditure increases the capital fund.

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