Nonprofit (not-for-profit) organization

Definition

A nonprofit (not-for-profit) organization is an entity that operates for a purpose other than generating profit. These organizations use surplus revenues to further achieve their mission or goals rather than distributing it as profit or dividends.

5 Must Know Facts For Your Next Test

1. Nonprofit organizations are exempt from paying federal income taxes under IRS code 501(c)(3).
2. Financial reporting for nonprofits includes statements of financial position, activities, and cash flows.
3. Nonprofits must adhere to specific accounting standards such as FASB ASC 958.
4. Donations and grants are primary sources of revenue for many nonprofits.
5. Nonprofits must disclose how funds are used to maintain transparency and accountability.

Related terms

For-Profit Organization: An entity that aims to generate profit which is distributed among owners or shareholders.

501(c)(3): A section of the Internal Revenue Code that provides federal tax exemptions for nonprofit organizations.

FASB ASC 958: The Financial Accounting Standards Board's Accounting Standards Codification specific to nonprofit entities.