In the not-for-profit-making organization; the excess of income over expenditure is?

A. deducted from the capital
B. added to the accumulated fund
C. added to the capital
D. deducted from the accumulated fund

Correct Answer:

Option C – added to the capital

Explanation

Surplus is the excess of income over expenditure. A credit balance in the Income and expenditure account shows surplus. It is the profit earned and should be added to the capital fund on the liabilities side of the balance sheet