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Role of Finance Management in Non Profit Organization

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Added on  2019-10-31

Role of Finance Management in Non Profit Organization

   Added on 2019-10-31

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ROLE OF FINANCIAL MANAGEMENT IN NOT-FOR-PROFITORGANIZATION1
Role of Finance Management in Non Profit Organization_1
Table of contentsIntroduction......................................................................................................................................3Demonstrating key differences of financial management...............................................................3Understanding the differences between Wesfarmers Limited and Community Housing Council ofSouth Australia................................................................................................................................3Critical evaluation of the differences...............................................................................................4Conclusion.......................................................................................................................................5Reference list...................................................................................................................................62
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IntroductionThe study aims to identify and evaluate the key differences of financial management between aprofit and a not-for-profit organization, where the two different organizations are selected tosupport the understanding of the need of financial management in not-for-profit organization(Bryce, 2017).Demonstrating key differences of financial management There are several differences between a profit and not-for- profit organisation. While the aim ofthe profit organisation is to generate income by selling goods and providing services. Theirnature of business is to earn profit. On the flipside, not-for-profit organizations are more serviceoriented, where they raise funds by the way of donations, for instances, public hospitals andtrusts are not directly involved in earning revenue (Arvidson and Lyon, 2014, p.875).On the financial aspect, profit motive organizations need to maintain financial statementsaccording to the rules of AASB and IASB. However, only income and expenditure account,receipt and payment account along with classified balance sheet are required to be prepared innot-for-profit organizations.Profit organisation is managed either by sole proprietor partner or by directors whereas the not-for-profit organisation is managed by either committee, trustees or by governing bodies.Money earned beyond by the profit organisation is delivered to the capital account, on the otherhand, the surplus of revenue over expenditure which results in the excess is delivered to thecapital fund. Profit organisation pay taxes for the profit that they made but not-for-profit do notdistribute profit individuals they may be tax exempt. When a profit organisation goes out ofbusiness they can liquidate their assets and give money to the shareholder whereas if a not-for-profit goes out of business its assets must be donated to other not-for-profit organization that hasa similar mission. Profit organisation are generally based to generate revenue for business peopleand their employee but not-for-profit are generally based to serve a humane and environmentalneed.Understanding the differences between Wesfarmers Limited and CommunityHousing Council of South AustraliaWesfarmers Limited being an ASX listed profit earning organization must prepare financialstatements with respect to the guidelines and accounting frameworks laid by AASB and IASB. It3
Role of Finance Management in Non Profit Organization_3

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