Community-Based Program

Accounting Short-Answer Questions

The major differences between for-profit and nonprofit organizations accounting procedure are for-profit organizations depends on accrual basis when there is funds available and nonprofit organizations relies on the flow of cash acceptance. Accrual basis accounting determines when revenue is earned and expenses are paid. For-profit and nonprofit organizations financial accountant pays bills and report it as liabilities and funds collected are report as asset collected. For-profit organizations are conscious of the fundamentals when preparing and managing budgets as control methods. It is difficult for any organizations to conduct and manage a budget that does not report information on an accrual basis.

Cash basis accounting is a method in which income is recorded when cash is received, and expenses are recorded when cash is paid out (Business Dictionary, n.d.). For-profit organizations use many transactions concerning disbursements transactions and cash receipts. Those transactions pertinent to payrolls, expenses, revenue interest income, fixed assets, and cost of sales. In the incorporated and computerized settings, the accounting purpose is to link the organizations operations, such cost control, inventory, and HR management. Nonprofit organization uses cash basis because it is less difficult, and it is time consuming. There are typically receipts journal, disbursements or expenditures journal, and petty cash (Martin, 2001).

Audits are becoming increasingly important to nonprofit sector because organizations or businesses are giving back to the community by providing cash donation. There are certain businesses taken action on how funds are use or manage according to the business standards. Human service nonprofit organizations are fund by the government agencies, which use the governments' grants to fund certain activities. The audits are turning into an interest because the accurateness of the data particularized on the federal reporting forms for the nonprofit organizations for the reason that the inconsistencies of various categories and for the reason that audit of nonprofit organizations has become a rising infrequency (2000). Audits recognize the weaknesses in the organizations' internal controls and provide recommendation of amends those problems or concerns.