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ACCA Applied Knowledge · Management Accounting · Performance measurement - application

Which of the following is a recognised difficulty in measuring the performance of a not-for-profit organisation compared with a profit-seeking company?

A key difficulty is that not-for-profit organisations usually have multiple objectives and outputs that are hard to quantify in monetary terms, so profit cannot serve as a single measure of success. Value for money can still be assessed using economy, efficiency and effectiveness.

  1. AOutputs and objectives are often multiple and hard to quantify in monetary termsCorrect
  2. BFinancial statements cannot be prepared by such organisations
  3. CValue for money cannot be assessed in any not-for-profit setting
  4. DProfit is always the single agreed objective

Explanation

Not-for-profit bodies typically pursue several non-financial objectives, such as quality of care or social outcomes, which are difficult to quantify and value in money. They do prepare financial statements, and value for money can be assessed using economy, efficiency and effectiveness. Profit is not their main objective.

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