What is the difference between a balance sheet of a nonprofit organization and a for-profit business?

Definition of Balance Sheet

The balance sheet is one of the main financial statements issued organizations. The balance sheet reports the organization's assets, liabilities, and the difference between the amount of assets and liabilities as of the final instant of the accounting period. In the U.S., the amounts are based on generally accepted accounting principles (GAAP).

Example of Main Difference Between Nonprofit and For-Profit Balance Sheets

A nonprofit or not-for-profit (NFP) organization's balance sheet is known as the Statement of Financial Position and this name will appear in the heading of this important and required financial statement. (The heading for a for-profit corporation usually shows the name Balance Sheet.)

A main difference between the NFP's statement of financial position and the for-profit corporation's balance sheet is the equity section:

  • The for-profit corporation's equity section has the heading Stockholders' Equity. Within this section are the paid-in capital amounts for the shares of stock issued, the amount of retained earnings, and possibly some other items.
  • The not-for-profit organization's equity section has the heading Net Assets. The reason for the use of Net Assets is the NFP does not have owners. Within the net assets section are the amount of net assets without donor restrictions and the amount of net assets with donor restrictions.

Some detail on the changes in the net assets section of the NFP's statement of financial position is reported in the NFP's Statement of Activities.

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