(a)What is a not-for-profit making organization? (b) Outline two differences between a for-profit organization and a not-for-profit making organisation. (c)...

Answer Details

(a) What is a not-for-profit making organisation?

A not-for-profit making organisation is a body formed to provide services or promote the welfare and common interest of its members or the public, rather than to earn profit for owners. Examples include clubs, societies, associations, churches and charities. Any surplus it makes is ploughed back to further its aims and is not distributed to members.

(b) Two differences between a for-profit and a not-for-profit making organisation

(Any two.)

(c) Sources of funding explained

(i) Subscription: The periodic (usually annual) amount paid by members to enjoy the facilities of the organisation; it is the main recurring source of income.

(ii) Life membership fee: A single large payment that entitles a member to lifetime membership without paying further annual subscriptions. It is usually capitalised and spread over the member's expected life, being credited to the Accumulated Fund or transferred in instalments to income.

(iii) Entrance fee: A one-off fee paid by a new member on first joining, in addition to subscription. It may be treated as revenue income of the year or capitalised, depending on the club's rules.

(iv) Donation: A gift of money or property received by the organisation. A general (small) donation is treated as income of the year; a large or specific donation is capitalised and added to the Accumulated Fund.