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Difference Between Not for Profit Organisation and Profit Earning Organisation

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  • Last Updated : 16 Jun, 2022
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Not for Profit Organisations are organisations that are set up for the welfare of society. Their main aim is to provide service to a specific group or public at large. They function without any profit motive. They do not maintain many books like other profit earning organisations, as they are not directly associated with manufacturing, producing, and selling goods.

Profit Earning Organisations are organisations that are set up to earn profit from their regular operations. They operate by offering various goods and services to customers. They manufacture, produce, and sell various goods and services, and maintain proper books of accounts. The main motive of such organisations is to earn profit by serving customers.

Difference Between Not for Profit Organisation and Profit Earning Organisation:

Basis

Not for Profit Organisation

Profit Earning Organisation

Motive

NPOs motive is to render services and for the welfare of the society.  These organizations are established with profit-earning motive.

Funds

NPOs’ source of funding includes donations, subscriptions, surplus, fees, etc. Profit earning businesses are funded through the capital contributed by the proprietor and the accumulated reserve and surplus.

Financial Statement                       

The financial transactions of NPOs are summarized and the financial statements are prepared in the form of Receipt and Payment A/c, Income & Expenditure A/c, and Balance Sheet.The financial transactions of profit-earning organisations are summarized and the financial statements are represented in the form of Trading A/c, Profit & loss A/c, and Balance Sheet.

Surplus/ Profit

The balance of Income & Expenditure A/c is either Surplus or Deficit.The balance of Profit & Loss a/c is either Net profit or Net Loss.
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