alleryWhy is R&P alone insufficient for NPO performance assessment?
AIt mixes capital and revenue
BIt excludes capital cash
CIt always shows surplus
DIt uses accrual basis only
Answer & Solution
Correct answer: A. It mixes capital and revenue
1. R&P does not distinguish capital from revenue items.
2. Increase in cash balance is not equal to surplus for the year.
3. Hence I&E is required to ascertain true surplus or deficit.
_Source: ICAI BoS Foundation Paper 1, Ch 8 "NPO", §2.1 limitations_
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