How Not-For-Profit Accounting is Different from Other Accounting

contributed by Louis Gonczy, Director of Finance and Administration
Accounting at a not for-profit is quite different from other businesses. The goals and profit objectives run down very different paths.

In a for-profit business your objective is to show as much profit as you can. On one hand you try to generate as much income as possible while keeping expenses as low as possible. You will never spend money that you don’t absolutely need to spend for functioning and growing of the business.

At a not-for-profit like the National Adoption Center our objective is to help as many as we can, based on our mission. Here, as in a for-profit business, we also try to generate as much income (grants & donations) as we can. However our expense objective is to spend as much as we can! For example, we may receive a grant of $100,000 to help children in foster care with their adoption process. The grant may specify that the funds are only to be used for this purpose and any unused monies are to be returned to the grantor. As we proceed through the life of the grant, if we’ve been able to economize and have only spent $75,000, we’ll look for ways to spend the remaining $25,000 in ways that fit within the guidelines of the grant. The last thing we want to do is not spend what we've been graciously awarded to further help children in care.

In a for-profit business, if you have unspent monies, it is considered a good thing, while quite the opposite may be true at a not-for-profit.