Introduction 

A non–profit organisation can be regarded as a particular type of business that has been specifically given tax-exemptions because it facilitates a social clause as well as provides a variety of public benefits. Any amount donated to a non–profit organisations are liable to be tax-deductible from business as well as individuals who make them. In this context it should be mentioned that the non-profit organisation itself does not pay any tax on the donated amounts received by it or some other sources from which it can earn money Non–profit organisations are often known as NPOs. 

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Vital Aspects of Non–profit Organisations

A non–profit organisation has some key features that differentiate it from other types of organisations. These have been outlined in the following.

  • Management: This is usually an executive committee or managing committee that looks after the entire organisation
  • The members of the organisation usually elect them
  • Income source: The key source of income of these non–profit organisations are subscriptions, donations, income from a variety of investments, government grants, legacies, and different other aspects
  • The motive behind service: Non-profit organisations do not have any particular motive behind their services
  • They are set up to serve the common public irrespective of gender, caste, or creed
  • Members: The non-profit organisations are mostly formed through subscriptions from different charitable institutions
  • Hence the members of these charitable institutions are the members of the non-profit organisation
  • Accounting information: The members can normally access the accounting information of the organisation
  • Reputation: These organisations mostly earn their reputation from their services to the company
  • Surplus: In case a surplus is generated in a year, it is credited over the capital fund

Different Types of Non-profit Organisations

Non-profit organisations are of several types including Incorporated Nonprofits, Unincorporated Non-profits, Private foundations, Public Charities, Non-profit trusts including Charitable Trusts, Charitable Remainder Trusts, Pooled Charitable Trusts, etc. Next, there are also some other types of non-profit organisations such as political organisations, Religious organisations, Churches, etc. However, in India, two main types of non-profit organisations are mostly visible. These have been outlined in the following

  • NGOs: These are mostly non-government organisations that fall under the Companies Act Section 8
  • Although properly established in India, these companies are authorised to acknowledge foreign funds
  • The National Intelligence Agency carefully monitors all this funding
  • Section 8 Companies: It can be regarded as a well-known type of non-profit organisation throughout India that falls under the Companies Act
  • These companies are specifically set for promoting social well-being as well as development

Non-profit Organisations and Government Organisations

Non-profit Organisations and Government organisations are often stated together due to their use of funds as well as accounting principles for funds. However, there is a difference between how to organise financial information as well as report. These have been outlined in the following.

  • Standards of Accounting: Similar to every program of accounting, there are several principles and guidelines that an entity organisation needs to follow
  • Both Government and Non-Profit organisations need to follow the GAAP or Generally Accepted Principles of Accounting
  • Mostly, the principles for the two types of organisations are the same
  • However, the Government organisations follow the Government Accounting Standard Board which is intended for investors, public officials, and taxpayers to use financial reports
  • On the other hand, non-profit organisations follow the standards given by the Financial Accounting Board of Standards that is intended for investors of public, private, or non-profit businesses using financial reports
  • Reporting: Government organisations are required to publish a CAFR that is a Comprehensive Annual Financial Report
  • The CAFR does a proper assessment of the government organisations’ financial assessment and is specifically put together using GASB and GAAP
  • On the other hand, non-profit organisations are not needed to publish a particular CAFR
  • Instead, they need to put together a thorough financial report for subsequent investors and the Board of Directors
  • Statement: Government and non-profit organisations mostly use 3 key types of financial statements
  • Among these, the Cash Statement and the Activities Statement are similar for both organisations
  • However, for the third statement, Government organisations use Net position statements whereas Non-profit organisations use financial statements

Conclusion

In this article firstly the concept of non-profit organisations has been identified. Next, some vital aspects concerning non-profit organisations have been analysed which have been followed by their different types. Lastly, the different government and non-profit organisations have been discussed.