Question

Select the most appropriate answers from the alternatives given below and rewrite the sentences.

Usually _______________ is a major source of revenue income for ‘Not for Profit’ concerns.
a) subscription
b) donations
c) legacies
d) life membership

Answer 1

Usually subscription is a major source of revenue income for ‘Not for Profit’ concerns.

Explanation: It is the main source of income for a not-for-profit organisation. It is recorded on the credit side, i.e. the income side of the Income and Expenditure Account.

Why Life Membership Fees is not the correct option?
On the other hand, life membership fees are the amount paid by a person in lump sum to become the member of the organisation for life. It is non-recurring in nature and, hence, added to the capital fund.

Why Legacy is not the correct option?

Legacy is the amount received by the not-for-profit organisation as per the will of a deceased person. It is non-recurring in nature and, therefore, treated as capital receipt. Hence, legacy cannot be treated as the main source of income for an NPO.

Why Donation is not the correct option?

Donations can be categorised into general donations and specific donations. Specific donations are received for particular purposes; hence they are to be capitalised. On the contrary, general donations, usually of big amount, are not expected to be received every year. Hence, cannot be treated as main source of income.