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Which statement is applicable to Not-for-profit entities? a
Which statement is applicable to Not-for-profit entities?
a. They do not use responsibility accounting.
b. They utilize responsibility accounting in trying to maximize net income.
c. They utilize responsibility accounting in trying to minimize the cost of providing services.
d. They have only noncontrollable costs.
Expert Solution
Responsibility accounting is a program involves assessment of department managers to provide a report on the same to the company management. The three responsibility centers are classified as cost centers, profit centers and investment centers. As a not-for-profit entity's objective doesn't include profit maximization, option b is not applicable. Option d is also incorrect as they do not specifically have non-controllable costs.
Therefore, Option a and c are correct as only the cost center is applicable for them and they try to minimize the cost
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