Characteristics of Not-for-Profit Organizations
Unique Features
Unlike for-profit businesses, NFPs focus on providing public benefits. Financial reporting emphasizes stewardship, transparency, and compliance with donor restrictions rather than profitability.
- Mission-oriented operations.
- Contributions are a major revenue source.
- No equity ownership interests.
- Resources may be donor restricted.
Tip
On the CPA exam, distinguish not-for-profit accounting from governmental accounting because they follow different reporting models.
Summary
NFP financial reporting centers on accountability and responsible resource management.