Question

Identify 5 differences and 5 similarities of non-profit Financial statement in comparison with a Corporate Financial statement?

Answer 1

Five differences of non profit financial statements in comparison with a corporate financial statement.

1.

Revenue :

In a corporate financial statement , revenue generally comes from sales of product, whereas in a non profit organisations financial statement sales is not a part of revenue , as there is usually no sale of product.

Revenue of a non profit generally comes in form of donations and grants received etc.

2.

Expenses :

manufacturing , selling, administrative expenses are generally part of a corporate financial statements income statrment . Whereas ,

There are no expenditure related to manufacturing or selling of a product in a non profit organization, its expenditure generally consists operating expenditure related to performance of their tasks and goals.

3.

Profit and loss A/c or revenue and expenditure account:

A corporate financial statement consist of profit and loss account , also presented as income statement, whereas

A non profit organization prepares revenue and expenditure account.

4.

Net profit or excess of revenue over expenditure:

In a corporation's financial statement , if income is more than expenses , it is shown as net profit , whereas

In a non profit organisations financial statement , if revenue is more than expenditure , it will be shown as excess of income over expenditure.

5.

Retained earnings:

Balance sheet of a corporation shows retained earnings which are distributed to shareholders as dividends, whereas

In non profit organisations there is no profit so , any excess of revenue over expenditure is added to their corpus fund , which are further used for organisations goals.

Five similarities of non profit financial statements and a corporate financial statement.

1.

Revenues :

Corporations and non profit organisations both show their revenues in their financial statements. As both of these organisation generate their revenues for their operations.

Corporations shows revenue from sale of product or rendering of services , and similarly non profit organisation financial statement shows revenue from grants and donations.

2.

Expenses :

Corporations and non profit organisations both show their expenditures in their financial statements as they both needs to do expenditure in different tasks and works to continue their operations.

3.

Financial performnce:

Corporations and non profit organisation both make a statement to measure their financial performance.

Companies make income statement to measure their performances , to see whether they generated profit or incurred loss.

Non profit organisation make income and expenditure account to calculate the excess of revenue or expenditure or vice versa.

4.

Assets :

Corporations and non profit organisation both have assets which are shown in their financial statement, which are showed on their historical cost , and accumulated depreciation are also shown.

Both the organisation use their assets to achieve their organisations goals.

5.

Financial position :

Corporations and non profit organisation both prepare balance sheet to measure and show their financial position at the end of the financial year.