Q.State any four distinguishing features of a Not-for-Profit Organization, as prescribed in the AP Intermediate (BIEAP) Second Year Accountancy syllabus.

A not-for-profit organization is set up to serve its members or society, and its accounting reflects that purpose rather than a trading motive.

Feature 1 — Service motive. A not-for-profit organization is formed to provide a service to its members or to society at large — for example, promoting sport, education, health, culture, or charitable relief — and not to earn a profit for any owner or shareholder.

Feature 2 — Management by an elected body. It is run by office-bearers and a managing committee (or governing body/executive committee) elected periodically by its own members, rather than by proprietors or directors holding an ownership stake.

Feature 3 — Source of finance. Its main sources of income are member subscriptions, entrance fees, donations, legacies, grants-in-aid, and income from investments of its own funds — not capital contributed in exchange for a share of profit.

Feature 4 — Treatment of surplus. Any surplus it earns in a year is not distributed among members as a dividend; it is retained within the organization and added to the Capital Fund, strengthening its resources for the future. …

Students sometimes list features of a sole trader's business by mistake (like 'capital contributed by owner for a return') — an NPO has no owner seeking a return, and …