Theory question 104
Not-for-Profit Organisations4. (a) List and explain four sources of income to a not-for-profit making organization. (b) State three limitations of the Receipts and Payments Account.
Show the model answer
(a) Any four: entrance fees – paid by new members on joining; subscriptions – regular dues paid by members; donations and grants – gifts from members, non-members or government; bar/canteen profits – from trading activities; profits from special events – dances, competitions, bazaars; investment income – interest on deposits; profit on sale of assets.
(b) Any three: it ignores accruals and prepayments; it does not show non-cash items such as depreciation and bad debts; it does not show the surplus or deficit; it mixes capital and revenue items; it does not show profit or loss on sale of assets.
Receipts and payments is only a cash summary, so its limitations are all things that are not cash.