The Financial Accounting Standards Board’s
(FASB) lists down some characteristics that distinguishes
a governmental and a not-for-profit entities from business
organizations
- It receives significant amounts of resources from the providers
of those resources, and they in turn do not expect to receive back
economic benefits in proportionate to the resources provided.
- It operates with a purpose other than to earn profit.
- It lacks any defined ownership interests.
Other differences between a ‘governmental and a
not-for-profit entities’ and ‘business organizations’ are:
- The mission and vision of the entity goes into determining the
goods or services provided by it.
- There is an important need to generate revenues greater than or
equal to expenditures/expenses incurred by it.
- The budget plays an important role in the governing process as
it is the document through which all the plans are made and are
implemented according to it.
- Governmental and not-for-profit entities exist to provide goods
and services to their stakeholders, not to generate profits.