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ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation

Which of the following statements about the objectives of a not-for-profit organisation such as a charity is correct?

A not-for-profit organisation reinvests any surplus in its cause but still needs financial objectives, such as covering costs and securing continued funding, to survive. It does not aim to pay dividends, and its primary purpose differs from that of a listed company.

  1. AIt has no need to control costs because it does not aim to make a profit
  2. BIts main objective is to maximise dividends to its members
  3. CIts surplus is reinvested in pursuit of its cause, and it still needs financial objectives such as covering costs and sustaining fundingCorrect
  4. DIts objectives are always identical to those of a listed company

Explanation

Not-for-profit bodies pursue a cause or service, but they must still manage finances so they can continue operating, so surpluses are reinvested rather than distributed. Claiming no need for cost control is wrong, as is a dividend objective or identical objectives to a listed company.

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