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Question

State the meaning of 'Not-for-Profit' Organisations.


Solution

Not-for-Profit Organisations (NPO) are those organisations which are set up with the prime objective of social welfare of the society; profit earning is not the objective of such organisation. Such organisations include schools, hospitals, trade unions, religious organisations, etc.

The management of such organisation is in the hands of trustees. As these organisations are not involved in making profit the main sources of income for these organisations are donations, subscriptions, life membership fees, grants etc. Like other organisation Trading and Profit and Loss account is not prepared in case of NPO rather receipts and payment account, income and Expenditure Account and Balance Sheet is prepared.

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