Question

Training Opportunities for Prison Populations (TOPP) runs a job-training program where persons exiting
the prison system learn skills to transition to employment and self-sufficiency. Here, they learn carpentry
skills and the organization sells their work in a retail store. Those involved earn money from the sales, and
the organization supports its mission as well. Among the statements below, which ones are true?
I. Not-for-profit organizations are exempt from most forms of taxation at the various levels of a country.
II. Resource inflows of a not-for-profit organization may come from donations, grants, contracts for service,
and the sale of goods and services.
III. Most of the resource outflows fund operations and capital improvements.
IV. Not-for-profit organizations are NOT allowed to earn profits.
A. I.
B. I. II.
C. I. II. III.
D. III. IV
E. I. II. III. IV

Answer 1

Correct Answer:

For a non-profit organization such as TOPP, the statements below are true:

C) I. II. III. is the correct choice

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Explanation
I. Not-for-profit organizations are exempt from most forms of taxation at the various levels of a country.

In almost all countries, such organizations are exempt from taxes.

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II. Resource inflows of a not-for-profit organization may come from donations, grants, contracts for service,
and the sale of goods and services.

Such organizations do not have any income, as such. They rely on donations and grants, and may also have a few market based services like contracts and sales.

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III. Most of the resource outflows fund operations and capital improvements.

Their main expenditures are on day to day operations, and also on capital. They require automobiles, computers, furniture etc. as their assets.

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IV. Not-for-profit organizations are NOT allowed to earn profits. -- This is false.

It is a common misunderstanding that they are not allowed to make profits. Actually, they very often do. However, most such profits will be taxable. Hence, they prefer not to allow such profits to be generated. The government allows a few exemptions on profits, as long as they are in line with the goals. Most organizations prefer not to report profits.