Question Details

The main source of revenue for ’not for profit’ organisation is:

Options

A

Sale of goods

B

Sale of periodicals

C

Subscription from members

D

Sale of assets

Show Answer

Correct Answer :

Option C

Subscription from members

Solution :

The correct option is Subscription from members.

To understand why this is the correct answer, let us analyze the nature and purpose of a "Not-for-Profit" Organisation (NPO):

1. Nature of Not-for-Profit Organisations:
Unlike commercial businesses, the primary objective of an NPO is to provide services to its members or the society at large without any profit motive. Examples include clubs, charitable trusts, welfare societies, and sports organizations.

2. Primary Source of Revenue:
Since NPOs do not engage in regular trading or manufacturing activities, they do not have regular sales revenue (like "Sale of goods"). Instead, they rely on regular contributions from their members to sustain their day-to-day operations. This regular amount paid by members periodically (usually annually) to keep their membership active is known as a Subscription. Hence, subscriptions constitute the main and most regular source of income for an NPO.

3. Why other options are incorrect:
- Sale of goods: This is a trading activity and is the main source of revenue for trading/profit-making businesses, not NPOs.
- Sale of periodicals: While NPOs might sell newsletters or magazines, this is a minor/auxiliary source of income and not the primary one.
- Sale of assets: This is a non-recurring capital transaction. Selling an asset provides cash flow but is not a regular source of operating revenue.

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