Question

How does accounting for a nongovernmental not-for-profit organization differ from accounting for a for-profit corporation? Choose a not-for-profit, review its financial statements, and explain the items that you find that are different from what you would see in the financial statements of a for-profit corporation.

Answer 1

Even though the Not-For-Profit non-governmental organization and a For- Profit Corporation prepare the reports for financial values but they differ in title and motivation. Below are the points of difference between these two:

S. No	Non- Profit Organisation	For Profit Organisation
1	Income is never distributed among the owners as their motive is not profit earning.	Income is distributed among the owners as their motive is increasing shareholder's wealth
2	These are exempt from paying the taxes.	They are liable to pay the taxes on net income.
3	It provides statement of activities to the donors and general public which includes revenues, expense and net assets.	It prepares Income statement to assess the financial performance 4 times in a year
4	There is no element as "Equity" as this type of entity is never owned by anyone , not even the Board of Directors.	They have this element known as Equity as there is the share of Owners/stakeholders.
5	Statement of Financial Statement is prepared to evaluate the financial position of the business.	Balance Sheet is prepared to evaluate the financial position of the business.
6	Assets-Liabilities = Net Assets(divided into 3 categories Unrestricted, Permanently restricted, Temporarily restricted)	Assets-Liabilities = Net Assets(divided between shareholders, current investors, potential investors)