Questions On Financial Management For Profit

The accounting equation: Assets = Liabilities + Owner’s Equity. Assets are the resources of the company. Examples include cash, land, buildings, and equipment. Liabilities are “outsider claims”, the company’s obligations to creditors. Examples include accounts payable, notes payable, and income taxes payable. Owner’s Equity represents “insider claims” of the company or the owner’s share of the assets. If a business is keeping accurate records this equation should always be in balance.

A balance sheet gives an overall picture of a company's financial situation by showing the total assets of a business, including liabilities plus equity. Current assets can include cash, accounts receivable, inventory and prepayments for insurance. The balance sheet is used by investors to get an idea of what the shareholders have invested, including

More specifically, cash flow for example; for-profit organization stake holders would expect a steady cash flow and even mirror that flow as a sign of success. On the other hand, in a non-profit cash flow may not be as steady so financial management expectations would differ.

According to our text, “Not-for-profit organizations lack a residual ownership claim and the organization’s purpose is something other than to provide goods and services at a profit.” “Because significant resources are provided to governments and not-for-profit organizations, financial reporting by these organizations is important.” (Page 2).

What are the major differences in recording transactions for a for-profit organization versus a not-for-profit, or are there any? For-profit organization would record certain transactions under Owner’s Equity, whereas the Not-for-Profit would use Net Assets. Also, a for-profit would not show restrictions on Owners’ Equity.

Nonprofit organizations have similar financial transactions and needs as for-profit businesses (Viader, & Espina, 2014). Their financial statements describe and summarize operating activities, obligations, and economic resources for a given period, usually one year (Viader, & Espina, 2014). A nonprofit is defined as a legal entity that does not conduct substantial commercial activity or earn a profit as its primary purpose (Viader, & Espina, 2014). The goal of the nonprofit is typically to provide services (Epstein, & McFarlan, 2011). In nonprofit organizations, management decisions are intended to result in furnishing the best possible service given resource constraints (DioGuardi, 2014). Basically, the success of a nonprofit entity is measured

Financial statements are commonly called balance sheets, income statement, statement of owner’s equity, or statement of cash flows.

Note: To make the balance sheet balance, define cash as equal to (Current liabilities + Net worth) – (Accounts receivable + Inventory + Other current assets + Net fixed assets).

While the terms nonprofit and not-for-profit are viewed by many as synonymous terms, they are differentiated as follows. Nonprofit Organizations (Non-Profit Organizations) operate very much like commercial businesses but do not seek a profit. Non-Profit Organizations include charities, private schools, and research organizations. Non-Profit Organizations do not pay taxes; donations to many are tax-deductible, usually up to a certain dollar limit. To be considered for Non-Profit Status, however, a nonprofit must register with the IRS, under section 501(c) of the federal Internal Revenue Code. Not-for-profit organizations (NFPOs), on the other hand, pay taxes and may earn a profit, but unlike dividends, those profits are not distributed to its owners or members (distribution principle). NFPOs include private clubs, sports organizations, political organizations, and advocacy groups. Contributions to not-for-profits are not tax deductible. While this research guide focuses on Non-Profit Organizations, it will cover issues in the entire nonprofit

A balance sheet is the most basic and essential financial statement for any organization. It contains the basic

“Hospitals can be non-profit, for-profit, and government-owned and/or operated” (Baker & Baker, 2006). There are different terms for each classification in how to report and handle the finances but the basics are the same for any type of business. Business finances require the following basic fundamentals: creating “budgets, understanding capital expenditure, loan acquisition, and financial fees” (Baker & Baker, 2006). Government owned and operated hospitals offer unprofitable services; which

* A balance sheet is snapshot of the financials for that organization (with assets on the left and liabilities on the right side) for that particular date that was requested

A not for profit organization is a corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive (Legal, 2013).” There are immense community benefits as a not-for-profit generally accepts everyone regardless of ability to pay. Nonprofit organizations are granted tax-exempt status which helps them to provide services to the public and are expected to be effective managers of their finances as well as being efficient (Financial Management, 2010). In doing so, they can gain exemptions from federal and state incomes taxes and have the ability to solicit tax-deductible contributions (Financial Management, 2010). Organization must follow legal financial

Not-for-profit organizations consist of a variety of organizations such as churches, education, health, social services, commerce, and clubs through schools whether it is a high school or a college. The difference between a not-for-profit organization and for-profit organizations is for-profit organizations generate profits for their owners and not-for-profit organizations exist to pursue missions that address the needs of society. Net assets are an important source of information for funders and investors externally and for board members and management internally to assess the financial health of a private, not-for private organization. Under the FASB requirements, private, not-for-profit Colleges and Universities are required to report net assets just as any other not-for-profit organizations. This paper will be focusing on the proper statements that are used for reporting for each classification along with examples of each statement and classification.

Accountants also ensure that organized financial statements are put out so that their company’s investors and lenders can accurately evaluate how a business is doing. One of the fundamental financial statements is the balance sheet. This