Difference between NPO and Profit Organisation class 12 CBSE Board

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Not for Profit Organisation and Profit earning organisation differ in their approach completely. In one hand NPO works only for welfare of society. On the other hand Business (profit earning) organisation main motive is just to earn profit.

Both also differ what financial statement they prepare to maintain their annual financial transactions.

We have compiled few basic differences between an Not for profit organisation and profit earning organisation below.

NPO Vs Profit Earning Organisation

BasisNPOBusiness Firm
1. MotiveMain motive to serve society and its own member with no profit motiveMain motive is to earn profits
2. Financial StatementsFinancial Statement include – Receipts and Payments account, Income and Expenditure Account and Balance Sheet.Trading account, Profit and loss account, Balance Sheet
3. Surplus vs ProfitThe net balance of Income and Expenditure account is either surplus or Deficit.The Net Balance of Profit & Loss Account is either net profit or loss.
4. Capital vs Capital FundIt does not maintain capital account. Instead they maintaining capital Fund.It maintain Capital Account.
5. Distribution of ProfitSurplus or deficit is not distributed among its members. It is added or subtracted from capital Fund.Net Profit or loss is distributed among the owners of the business.

Further Reading:-

Difference between Income and Expenditure Account and Profit & Loss Account

Difference between Receipts and Payments Account and Income & Expenditure Account

Difference between Receipts and Payments Account and Cash Book

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