Describe the four fundamental ways in which not-for-profit organizations differ from business enterprises. What are the reporting objectives of NFPs?

The four fundamental ways in which not-for-profit organizations differ from business enterprises:
1. NFPs have members and not owners. There is no residual economic interest.
2. The organizations' objectives are to serve the common good, rather than to maximize earnings or generate a return on investment from the owners.
3. The nature of revenue and expenses differ. Revenues are generated from sources that will not receive benefit from the expenses incurred. For example, governments may provide revenues, but individuals may be the recipient of the services provided. The revenues may be restricted as to the type of expenditures that can made, impacting the flexibility of the organization. Finally, revenue is recorded when the related expenses are incurred. (This is opposite to what is generally done with profit-oriented businesses that report revenue and then match with the expenses incurred to generate revenue.)
4. Suppliers of funds are not providing capital to generate an investment return. Since the suppliers are one of the primary users of financial statement, objectives in financial reporting will be different than business enterprises' reporting objectives.
Reporting objectives of NFPs include:
1. Stewardship-How has the organization used the funds that were provided?
2. Measuring the costs of services rendered-Users will want to ensure that the services have been provided effectively and efficiently.
3. Cash-flow prediction-Will the organization have enough cash to carry on its activities in the future?
4. Management evaluation-How well has management achieved the above objectives?