Theory question 102
Not-for-Profit Organisations(a) What is a not-for-profit making organization?
(b) Outline two differences between a for-profit organization and a not-for-profit making organization.
(c) Explain the following sources of funding in a not-for-profit making organization: (a) subscription; (b) life membership fee; (c) entrance fee; (d) donation.
Show the model answer
(a) An organisation set up to provide services or welfare to its members or society, not to make profit, e.g. clubs, societies, churches.
(b) Any two: aim – profit vs service/welfare; result – profit/loss vs surplus/deficit; capital – owner's capital vs accumulated fund; statements – trading, profit and loss vs receipts and payments and income and expenditure; owners – proprietors/shareholders share profit vs members do not share surplus.
(c) Subscription: the regular (usually annual) fee paid by members.
Life membership fee: a lump sum paid once for membership for life, usually spread over several years.
Entrance fee: a one-time fee paid by a new member on joining.
Donation: a voluntary gift of money or goods from members or outsiders.
Define, contrast with a business, then explain each income source.