Discuss the major similarities and differences in accounting for for-profit and not-for-profit organizations
Discussion topic:
1. Discuss the major similarities and differences in accounting for for-profit and not-for-profit organizations. Be sure to consider differences in organizational ownership, fund accounting, and financial reporting.
Student Post
1. Similarities between for-profit and not-for-profit organizations:
(1) Not-for-profit organizations have boards, management and staff for efficient working, same as present in for-profit organizations.
(2) The sources for both the not-for-profit and for-profit organizations are limited, and they have to achieve their goals by using those limited available funds.
(3) As the for-profit organizations report their financial statements at the end of the accounting period, the not-for-profit organizations are also required to report at the end of the accounting period.
Differences between for-profit and not-for-profit organizations:
(1) The ownership of the for-profit organizations is held in the hands of business owners, shareholders or sole proprietors or partners. Whereas the ownership of not-for-profit organizations will be held by trustees, governing bodies or committee members.
(2) The funds of the for-profit will be raised by share capital, bonds, loan, etc. and the management has to account them properly and need to report its utilization to the shareholders from time to time. The funding sources of not-for-profit organizations is by way of government grants, donations, etc. these funding should be properly accounted for and reported to the governing bodies.
(3) The financial reporting in case of for-profit organizations should be made to the shareholders in the form of income statements, cash flow statements, and balance sheets at the end of accounting period. the not-for-profit organizations have to report in the form of receipts and payment account, income and expenditure account and balance sheet at the end of accounting period
Reference
Hernandez, S. (04/2016). ADVANCED TOPICS IN ACCOUNTING RESEARCH [VitalSource Bookshelf version]. Retrieved from https://bookshelf.vitalsource.com/books/1260144933
2. Given the difference of the for profits looking to make a profit for the stakeholders. Unlike, not for profits which look only to make gains to increase productivity on services provided such as Medicare, and othr governmentally funding programs. These programs have the grants or funds broken down to cover administration costs, utilities, and project costs. Any extra funds are distributed as the program needs to allocate for more funding for the program. Class, how would you like to work for a non for profit? What are the benefits over working for a not for profit compared to both gain funding through loans but not for profits can have a fee for membership but not for all items provided. Mission for not for profits differs from for profits who gauge their income off of how much they are wiling to make from a product and where that product is disturbed. Considering all the gains that for profits get from profits they also are taxed differently. Not for profits don’t pay taxes on income from donations and they are made to reveal all financial and operating details to the public to show the money is being used to generate a public benefit. Class what are your thoughts on the tax exempt status of not for profit?
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