Question

Q.47. Distinguish between Not 3 points
Profit Organisation and
Trading Organisation
Your answer​

Answer 1

Explanation:

The differences between profit and non-profit organisation can be drawn clearly on the following grounds:

A profit organisation is defined as a legal organisation, which is operated with the sole aim of earning profit from the business activities. On the flip side, a non-profit organisation is one that is operated with the primary objective of benefiting the society as a whole.

A profit organisation, as its name suggests, works for profit maximisation of the concern. As against this, a non-profit organisation works for providing service, for the well-being of the society.

A profit organisation can be a sole proprietorship, partnership or a body corporate, i.e. company whereas a non-profit organisation is an association of person, which can be a club, trust, public hospitals, cooperative society, etc.

The management of a profit organisation is overlooked by a sole proprietor in the case of sole proprietorship, partners in case of partnership and directors in case of company. On the contrary, there is the board of directors, trustees, committees or governing bodies who look after the management of a non-profit organisation.

The major source of income, for a profit organisation, is from the sale of goods and services. Conversely, the non-profit organisation, derive a considerable part of their income from donation, subscription, membership fee, charity and so on.

When it comes to the commencement of the entity, a huge amount in the form of capital is brought in by the owners to run the business. Unlike, the non-profit organisation, raise funds for commencement, in the form of contribution through donation, grant, legacies, subscription, etc.

The financial statement of a profit organisation includes the income statement, balance sheet and cash flow statement. In contrast, the non-profit organisation prepare receipt & payment a/c, income & expenditure a/c and balance sheet prepared at the end of accounting year to know their financial position.