Choice "B" is correct. A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.). This method helps donors and others in assessing an organization's service efforts.
Choice "d" is incorrect. There is no requirement that the not-for-profit organization must report its expenses in a natural classification, except for voluntary health and welfare organizations.
Choice "a" is incorrect. A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.). There is no requirement that the organization must also report the expenses in a natural classification in a separate statement, except for voluntary health and welfare organizations.
Choice "c" is incorrect. A not-for-profit organization needs to report its expenses in the statement of activities by their functional classification (program classification, supporting activities, fund-raising, etc.). There is no requirement that the organization must also disclose the expenses in a natural classification in the notes to the financial statements.
