WAEC Accounting 2020 Theory — Question 2

Model answer

(a) A not-for-profit making organisation is the type of organization in which the main purpose is the promotion of welfare of the society. Thus, it is an organization that is not business-oriented; for this reason, it makes surplus and not profit. (b) Differences between for-profit and not-for-profit making organisation: i. The sole purpose of for-profit making is to maximize profit, while not-for-profit making aims to maximize welfare. ii. While for-profit making has accumulated capital, not-for-profit making has an accumulated fund. (c)(i) Subscription: This can be defined as the annual compulsory payment made by members of an organization to signify their membership with the organization. (ii) Life membership fee: This is a fee paid by members of the organization to indicate perpetuity of his/her membership with the organization. (iii) Entrance fee: This can be referred to as the fee charged by an organization before members can be allowed to attend some particular events. (iv) Donation: This is a voluntary gift by members and non-members to promote the organization. It is non-compulsory payment.