Why Are There Differences Between Not-For-Profit and For-Profit Accounting?
I have decided to postpone the short history of not-for-profit accounting that I proposed as my first topic, and instead jump into the remainder of the course, even though I know all my readers are waiting breathlessly for the history. But I promise that later on, I will provide you with an exciting historical perspective on the subject. The answer to the above question lies in the essentially different characteristics of not-for-profits (NFPs) and for-profit (FP) organizations. In the next few installments I will discuss some of these key basic differences. This first installment explains two important characteristics: organizational objectives, and budgets, Annual Reports, and internal versus external reporting. Different Objectives The key objective of FPs is to earn and maximize profits. Financial reporting allows interested parties to determine if an entity is performing adequately by examining the net income or net loss for an accounting period. Net income may benefit the manager
