There are many similar aspects of for-profit and nonprofit business accounting in Orlando like generating pay rolls, book keeping, managing and recording expenses and income. However, nonprofit accounting is different in many ways as well. The main aim of a nonprofit organization is to ensure a greater revenue then cost.
This enables them to provide for the needs of the society. For-profit organizations focus on generating revenues as well as costs. In Orlando, nonprofit accounting is done by professional accountants so that the organization provides for the needs of society in the best possible ways. Here are a few different aspects of for-profit and nonprofit accounting.
Use of Cash- and Modified Cash-Basis Accounting
Instead of accrual basis accounting, nonprofits utilize cash basis accounting for recording revenues and expenses. This indicates nonprofit organizations only record revenues when they receive cash and record expenses upon payment. Some nonprofits use modified cash basis accounting. They use accrual basis accounting on larger expense and revenue items. Many for-profit accounting includes records of all revenues and expenses through accrual accounting.
Functional Expense Allocation
Nonprofits have to report all expenses and revenues through functional expense classifications. Supporting services and program services are the two types of functional expense classifications. The supporting services include fundraising and donation drives. These practices vary in different organizations as each nonprofit organization allocates funds as per their needs.
In Orlando, nonprofit accounting includes the preparation of statement of financial position. Since a nonprofit does not have an owner, they don’t use balance sheets. The statement of financial position merely focuses on liabilities and assets. The net assets and are scrutinized by accountants for assessment of finances of nonprofit organization. However, a for-profit accounting includes preparation of balance sheets quarterly.
It lists all equity of the owner of that organization. Equity includes all assets owned by the organization as well as liabilities owed to others by the organization. Equity of organization’s owner has a direct impact on preferred and common stock of company.
For-profit accounting includes preparation of income statements quarterly, apart from the balance sheets. This income statement is a record of all losses, expenses, gains and revenues generated by the company. The main aim of generating quarterly income statements is to access overall financial performance of the company.
This is significant for company’s share price and value as stockholders of a company have rights to view these income statements. However, nonprofit accounting does not include compilation of income statements. Instead they prepare a quarterly activities statement. In this document, the revenues minus all expenses and net assets of organization are included.
For-profit are not exempted from taxes. Nonprofits, though exempted from taxes, are still required to prepare annual reports of all functional expenses and operational expenses of organization. Functional expenses in nonprofit accounting Orlando include fundraising activities and program services. Tax-exempt nonprofits are required to submit these reports on yearly basis.
These are a few main differences between for-profit and nonprofit accounting in Orlando. Though, they may be more similarities and differences between both depending on their requirements and functions.
If you need more information about our Orlando accounting and tax services, please contact us at 407-502-2400. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, and Celebration, FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin numbers, incorporations, and non profit 501c3 tax exempt status applications.