Cafr

Businesses for-profit or not-for-profit report their periodic activities to their investors, stockholders, and creditors. For both types of businesses the very basic accounting principles are similar. Government organizations have focus on the quality of the service providing to the citizens. The accounting for the government organizations are more focused on reporting all the receipts from spending of the funds collected from the citizens. The for-profit organizations are more focused on the maximizing the profits from all the product lines of the business and reporting all the operating activities with the focus on increasing profits.

For the government organizations the source of income is involuntary to the public in forms of fees and taxes. Involuntary because the public is mandated to pay the taxes and fees that in turn the government uses to provided services to the public for no extra charge. The for-profit organizations source of income is all voluntary. The public voluntarily purchases services and goods provided by the for-profit organizations.

Both types of organizations are reporting the income received the difference between the two are that the government uses the reporting as a tool to report to the public the accuracy and transparency of its operations. For-profit organizations report the excess revenue after all the expenses is reported as net income or net profit.

Not-for-profit or government organizations separate the funds received by the type of purpose of the fund. The funds received from public for services to the public for different operations causes the need to keep separate sets of accounting for each fund received. This allows more transparency and accurate reporting to the public of use of the funds received. In contrast, for-profit organizations are not separating the types of operations just combines them all in one and reports using one set of accounts for all types of operations and source of income.

The for-profit and...