Introduction to Not-for-Profit Accounting
What Is a Not-for-Profit Organization?
A Not-for-Profit (NFP) organization exists to provide services or achieve a charitable, educational, religious, scientific, cultural, or social mission rather than to earn profits for owners. Although NFPs generate revenues and incur expenses, any excess of revenues over expenses is reinvested in the organization's mission instead of being distributed to shareholders.
- No owners or shareholders.
- Mission-driven rather than profit-driven.
- May receive contributions, grants, membership dues, and service revenue.
- Governed by a board of directors or trustees.
Note
Not-for-profit organizations follow U.S. GAAP guidance that differs from both business enterprises and governmental entities.
Summary
The primary goal of NFP accounting is to demonstrate accountability for resources used to fulfill the organization's mission.