What Are the Differences Between Nonprofit and For-profit Accounting?

READ THE FOLLOWING POST AND PROVIDE YOUR OPINION OF THE WRITER’S POST USING IN-TEXT CITATIONS TO SUPPORT YOUR RESPONSES. UTILIZE THE SAME REFERENCES PROVIDED BELOW.

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The financial statements of a company provide a representation of the company’s current performance and overall value of the company. The income statement, the total revenues and expenses are listed giving the manager a summary of the company’s revenues and expenses of a specific period of time and helps determine the total profit or loss to the company over the stated income period. This is important because it clearly states whether a company is making a profit (Rodeck, 2018). As the manager, it’s important to review the income statement regularly because it provides current profitability by displaying separate sections detailing revenues and gains and another section detailing expenses and losses (Rodeck, 2018).

Nonprofit organizational revenue refers to the funds generated through its primary operations which may include amounts collected through contributions, fundraising, membership, and service fees. Like any other business, a nonprofit organization must generate revenue to cover various expenses, such as utility bills, employees’ salary, and operating costs. Nonprofits shows its revenue and net assets or income in its Statement of Activities, which is similar to the income statement of a for-profit business. Both statements detail the organization’s financial health (Zimmer, 2019).

Nonprofits also have a statement of activities as opposed to an income statement. This statement of activities lists the revenues and expenses as well as the net assets. Another difference is for-profit entities show the difference in revenue less expenses as net income however, nonprofits is shown as changes in net assets because the goal of the nonprofit is not to generate net income but to reflect how it uses its net assets to accomplish its mission (Paszkiewicz, 2014) .

References

Rodeck, D., (2018). Why are Income Statements Important-https://pocketsense.com/income-statements-important-8437094.html

Paszkiewicz, E., (2014). What Are the Differences Between Nonprofit and For-profit Accounting? https://www.gma-cpa.com/blog/what-are-the-differences-between-nonprofit-and-for-profit-accounting

Zimmer, T., (2019). Difference Between Income & Revenue of a Non-Profit- https://smallbusiness.chron.com/difference-between-income-revenue-nonprofit-25352.html

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