Question

What are the defining distinctions between for-profit businesses and not-for-profit entities, including governments? What are the implications of these distinctions for financial reporting?

Answer 1

The profit business units are main motive is to make profits and grow financially strong but whereas the not-for-profit organizations, their main motive is to serve the people in charities etc. and they do not have any goal to make profits and grow financially strong. Profit business units do not get benefits from Governments like tax exemptions, no tax on profits etc. but not-for-profit organizations do get such benefits like tax exemptions, no tax on profits etc. because their ultimate purpose of the business is not to make profits but to serve.

Both the profit business units and not-for-profit business units need to maintain the financial statements and they both should report all the financial data of their businesses.