Differences and Similarities between For-profit and Not-for Profit Organizations

999 Words4 Pages
Financial issue: differences and similarities between for-profit and not-for-profit accounting. While for profit organizations and not-for-profit organizations are different in many ways, even down to the core of how and why they conduct business and operate, there are also some similarities about them. Some similarities even go into their accounting uses and methods. Because they both do monetary transactions, they must have some similarities; however because they are very different, they also have major differences in how they conduct monetary transactions. Differences and Similarities A major similarity is, of course, that not-for-profits and for-profits alike must report its finances to the Internal Revenue Service (IRS). However, nonprofits tax status will be exempt from income taxes if the IRS approves the organization as a 501(c). Nonprofits are required to provide financial statements by U.S. generally accepted accounting principles (GAAP) and is governed or regulated by the Financial Accounting Standards Board (FASB). Some of those financial statements include: Statement of Financial Position, Statement of Activities, Statement of Functional Expenses (The FASB does not require the statement of functional expenses for every nonprofit, however it is encouraged), Statement of Cash Flows, and Notes to Financial Statements. Even though Nonprofits are exempt from paying taxes, they must still follow basic reporting rules set up and maintained by FASB. Keeping up
Open Document