Financial Management for Human Service Administrators



Financial Management for Human Service Administrators

Differences between Nonprofit and For-Profit Organizations

Profit and Non-Profit organization as name suggests differs with respect of goals. Profit organization focus is on profit maximization while other focus is not on profit rather on delivery of specific quality services. The following are the major difference between the between the Non-Profit and Profit Organization (Epstein, McFarlan, 2011).

Factors

Nonprofits

For-profit corporations

Owner Of the Company

This organization is not owned by any anyone

This organization is not owned by Shareholders

Main Mission

Offer Services that are required by society

Profits goes to Shareholders

Secondary Mission

Revenue shall be greater than expenses so that additional service provided to the society

Sell products and increase net income

Exemption of Tax

Tax is exempt due to the goal which is to work for society welfare and taxed on the secondary mission

Taxed on the net income

Balance Sheets

As it has no owners, Balance Sheet is not prepared by this organization.

Balance Sheet is prepared on quarterly basis in order to indicate the owner's equity which has direct affect on common and preferred stock of the company.

Income Statements

Non-Profit prepare a statement each quarter of activities which comprises of revenues and expenses along with net assets.

Income Statement is prepared on quarterly basis which state revenues, expenses and losses if incurred.

Audits Important in the Nonprofit Sector

Currently, Audit has been an important part for Non-Profit companies since they are responsible for money donated by the people. For this reason, they want their financial activities to be reviewed by auditors for good governance and effective management of scarce resources. This further shows the transparency as independent expert has scrutinize the financial records and this also increases the confident of the donors in the organization (Privett, Erhun, 2011).

Exercise Question

Answer 4.1:

Portland After School Program

Journal Entries

Date

Particulars

Debit

Credit

July 1, 20XX

Cash 

$15,000

 

 

Revenue 

 

$15,000

July 19, 20XX

Prepaid Insurance 

$9,000

 

 

Cash 

 

$9,000 ...