Question

11. What are three general characteristics of private not-for-profit (NFP) entities that make them different from for-profit entities?

Answer 1

As it's name clearly state that one is not-for-profit and another is for profit entities. So the not-for-profit entities are the organisation which motive is not to earn money they work for any religious or social cause but at another side profit entity are those whose main motive is to earn money.

The main difference between Not-for-profit (NFP) entities and for profit entities:

1. The NFP do not require to pay any tax for the amount that they get on the another side profit entities are have to pay Income Tax or other tax on their income that they generate.

2. The NFP motive is not to earn money their main motive is to help another on the other side profit entities main motive is to earn money by selling their product or by rendering services.

3. The profit entities make income statement to assess their financial performance while on another side NFP prepares Income and Expenditure account to know their total donations and expenditures.

There are many more small-small differences that make not-for-profit entities and for profit entities different.

I hope this clear your doubt.

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