alleryStart learning →In the balance sheet of a not-for-profit organisation, a surplus for the year is:
AAdded to the capital fund on liabilities
BShown on the assets side as a balance
CSubtracted from the capital fund shown
DDistributed among all the club members
Answer & Solution
Correct answer: A. Added to the capital fund on liabilities
1. The balancing figure of the income and expenditure account is either a surplus or a deficit.
2. The textbook states that this figure is transferred to the capital fund in the balance sheet.
3. A surplus is added to the capital fund, and a deficit is subtracted from it.
4. The capital fund sits on the liabilities side, so that is where the addition appears.
5. These organisations have no profit motive, so the surplus is not distributed to members.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 2 "Accounts of Not-for-Profit Organisation", §2.5.1 and §2.6_
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