In Canada, we have business and non-business organizations.
Required:
Explain the difference between these two types of organizations. Why should they be allowed to follow different accounting policies?

Business organizations, whether private or public, are driven by profit. They sell identifiable goods and services to identifiable customers, who pay for these goods and services. There is a link between revenue and costs.
In contrast, non-business organizations include NFP and government organizations. These types of entities are not motivated by profit. In these types of organizations, services and products are not as well defined as in business enterprises. The customers or clients who use these products and services are also not identifiable. Finally, the customer (or client)often does not directly pay for the services as they are used, so the link between revenue and costs does not exist.
For business enterprises, where profit motivation is key, standards will be written with this in mind, ensuring that revenue and expense items are properly recognized as incurred.
Non-business enterprises generally have unique types of stakeholder relationships and transactions that never occur in business enterprises. For example, how should donations and government grants be recognized? How and when should costs be recognized when revenue is not "earned" through normal business activities? These types of issues require a different set of financial reporting standards.